UK Housing & Mortgage Market 2025: Mid-Year In-Depth Report

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UK Housing Market in 2025: Navigating Growth Amid Economic Shifts and Policy Reforms

The UK housing market in mid-2025 presents a picture of resilience, with average prices showing modest year-on-year growth. However, beneath this surface lies a complex interplay of easing monetary policy, persistent affordability challenges, significant regional disparities, and transformative regulatory shifts in the rental sector.

Data from mortgage lender Nationwide indicated a 3.5% annual increase in UK house prices in May 2025, accompanied by a 0.5% rise from the previous month. This brought the average property value to £273,427.¹ This uptick, which surpassed economists’ expectations, largely reversed a dip seen in April.¹ Such growth is occurring despite broader global economic uncertainties, finding support in domestic factors such as low unemployment and wages that have been rising faster than inflation.¹

The unexpected strength observed in May’s house price figures, particularly against a backdrop of global economic unease, hints at either a degree of pent-up demand or a swifter-than-anticipated positive market reaction to expected interest rate reductions. Nationwide’s chief economist pointed to “supportive underlying conditions” like low unemployment, wage growth, and the “prospect of some further Bank of England interest rate cuts” as contributing factors.¹ However, this resilience may be more fragile than it appears. Should these domestic supports—robust wage growth, continued low unemployment, and the materialisation of anticipated rate cuts—falter or be overshadowed by international economic shocks, the observed price stability could rapidly diminish. The market appears to be treading a fine line.

Further complicating the picture is the juxtaposition of these rising house prices with a sharp, policy-induced contraction in property transaction volumes recorded in April.³ This highlights the market’s acute sensitivity to fiscal interventions and suggests that the underlying demand might not be as robust as price figures alone imply. The significant drop in transactions, directly attributed to the conclusion of a partial exemption on purchase taxes (stamp duty changes) ¹, indicates that while values for completed sales are up, overall market activity has been substantially jolted. This raises questions about the depth of sustainable demand at current price levels without the crutch of fiscal incentives.

This article will dissect the key forces shaping the 2025 property landscape, from the Bank of England’s evolving interest rate strategy to the far-reaching implications of the Renters (Reform) Bill and new energy efficiency mandates for the rental sector.

National Price Trends: A Story of Cautious Optimism Tempered by Economic Realities

The national outlook for UK house prices in 2025 is one of cautious optimism, with most forecasts pointing towards continued growth. However, this optimism is tempered by underlying economic realities, including modest growth projections and the ongoing influence of global economic conditions.

House Price Forecasts – A Consensus on Growth, Divergence on Degree

Major property market forecasters are largely in agreement that UK house prices will continue their upward trajectory in 2025, though the predicted extent of this growth varies. Real estate consultancy Knight Frank, for instance, revised its 2025 forecast upwards from an initial 2.5% to 3.5% annual growth.² Savills offers a slightly more bullish prediction, anticipating 4% growth over the course of the year.²

These projections align with findings from a Reuters poll of housing market experts conducted in February 2025, which indicated an expected 3.5% rise in 2025, followed by a 4.0% increase in 2026.⁵ This itself was an upgrade from a previous poll that had pegged 2025 growth at a more modest 3.1%.⁵

Recent market data provides further context. Nationwide’s figures for May 2025 showed a 3.5% annual rise in prices.¹ Meanwhile, provisional data from the Office for National Statistics (ONS) reported a more substantial 6.4% annual increase in the 12 months leading up to March 2025, bringing the average UK house price to £271,000. This was an acceleration from the 5.5% annual growth recorded in February 2025.⁷ Property portal Zoopla, using its own index, forecasts a 2% rise over 2025, or 2.5% by the end of the year, with average prices standing at £268,250 as of April 2025, reflecting 1.6% annual growth at that point.⁸ Rival portal Rightmove reported that average asking prices hit a new record in May 2025 at £379,517, a 1.2% year-on-year change.¹⁰

The divergence in these figures underscores significant market uncertainty and the impact of differing methodologies. The ONS data, based on completed sales, is lagged and the strong March figure could reflect transactions agreed earlier in the year, possibly influenced by the then-approaching stamp duty deadline. Nationwide’s data is more current for May but is derived from its mortgage approvals, representing a specific segment of the market. Forecasts from entities like Knight Frank, Savills, and Reuters polls reflect expert consensus based on various models and assumptions about future economic conditions, such as the pace of Bank of England rate cuts and the trajectory of inflation. Consequently, the true state of the market is nuanced. It appears less uniformly strong than the highest ONS figure might suggest, and more aligned with the cautious optimism embodied in the 3-4% growth forecasts. Buyers and sellers are advised to consider a range of indicators rather than relying on a single figure.

The Economic Engine: Bank of England’s Balancing Act

The Bank of England’s monetary policy remains a critical influence on the housing market. At its May 2025 meeting, the Monetary Policy Committee (MPC) voted to cut the Bank Rate by 0.25 percentage points, bringing it down to 4.25%.¹¹ This decision was reached by a narrow 5-4 majority, with two members advocating for a larger 0.5 percentage point cut to 4%, while two others preferred to maintain the rate at 4.5%.¹¹ This split vote reveals a deep uncertainty within the MPC itself regarding the optimal balance between addressing residual inflationary pressures and supporting a fragile economy. Such internal division signals that the path of future rate cuts may be less predictable and more heavily reliant on incoming data than the market currently anticipates, adding a layer of risk to the housing market’s recovery.

The May rate cut was justified by “continued progress in disinflation,” as the Bank strives to meet its 2% inflation target while simultaneously sustaining economic growth and employment.¹¹ However, the Bank acknowledges that inflation is on a “bumpy path.” Projections indicate a temporary rise to 3.5% in the third quarter of 2025, primarily due to increases in energy and regulated prices, before an expected return to the 2% target thereafter.¹¹ Risks to this inflation outlook are considered to be present in both directions, and the Bank has emphasized that monetary policy is “not on a pre-set path” and that it will “remain sensitive to heightened unpredictability”.¹¹

Economists polled by Reuters anticipate further Bank of England rate cuts throughout the year, potentially seeing the Bank Rate fall to 3.75% by year-end.⁵ Analysis from Brunel University also suggests a base rate around 3.75% by the close of 2025.¹⁴ These anticipated reductions in borrowing costs are expected to provide a supportive tailwind for the housing market.¹

Wider Economic Climate: Growth, Wages, and Global Winds

The broader economic environment provides a mixed backdrop for the housing market. UK economic growth forecasts remain modest. The Bank of England’s baseline forecast projects GDP growth of 0.8% for the second quarter of 2025.¹² Brunel University suggests that 2% GDP growth is the best-case scenario for 2025 ¹⁴, while a Reuters poll indicated a downgrade in median growth forecasts to 1.1% for the year.⁵

Supportive factors for the housing market, as cited by Nationwide, include low unemployment and wages that have been rising faster than inflation.¹ Zoopla also noted in April 2025 that average earnings growth at 5.6% remained well ahead of general inflation.⁸ However, the Bank of England anticipates that private sector regular pay growth will slow significantly by the end of 2025, to around 3.75%.¹¹ This projected slowdown in pay growth, occurring while inflation might remain “bumpy,” could exert pressure on household finances later in 2025. If wage growth decelerates substantially while inflation stays elevated, real disposable incomes will be squeezed. This could diminish the current support from “wages rising faster than inflation” as the year progresses, potentially creating a headwind for house prices in late 2025 or early 2026, even if mortgage rates are somewhat lower.

Global economic uncertainties, particularly surrounding international trade policies such as the imposition of tariffs by the United States, have intensified.¹¹ While these factors could weaken global growth, the Bank of England suggests the direct negative impact on UK growth and inflation is likely to be smaller.¹¹ Nevertheless, a fragile domestic economic recovery means the housing market’s current strength is contingent on these supportive local factors holding firm against potential global headwinds.

Table 1: UK House Price Forecasts & Key Indicators (2025)

The Mortgage Maze: Easing Rates Meet an Enduring Affordability Squeeze

The mortgage market in 2025 is characterized by the dual forces of gradually easing interest rates, following Bank of England actions, and a persistent, deeply entrenched affordability crisis, particularly for those attempting to take their first step onto the property ladder.

Impact of BoE Rate Cuts on Mortgage Products

The Bank of England’s decision to reduce the base rate to 4.25% in May 2025 has begun to ripple through the mortgage market, with lenders adjusting their product rates.¹¹ MoneyWeek has observed the re-emergence of sub-4% mortgage deals, signalling a more competitive lending environment.²

Major lenders including Halifax and Nationwide have responded by announcing reductions in their Standard Variable Rates (SVRs) and Base Mortgage Rates (BMRs), effective from June 2025. Tracker mortgages, which are directly linked to the Bank Rate, will also see corresponding decreases.¹⁵ For instance, Halifax’s Homeowner Variable Rate and SVR are set to fall from 7.99% to 7.74%.¹⁵ Similarly, Nationwide’s SMR will decrease from 7.24% to 6.99%.¹⁶

Data from financial product comparison service Moneyfacts, as of early June 2025, illustrates the current rate landscape. Best-buy two-year fixed-rate mortgages for first-time buyers (FTBs) with a 10% deposit (90% LTV) were available at around 4.22%, while five-year fixed rates for the same group were approximately 4.33%.¹⁹ For those looking to remortgage with 40% equity (60% LTV), two-year fixed rates could be found at 3.87%, and five-year fixed rates at 3.85%.¹⁹ Rightmove also noted in May 2025 that the lowest available two-year fixed mortgage rate had fallen to 3.72%.¹⁰

It is crucial to contextualize these movements: while rates are indeed falling, they remain significantly elevated compared to the ultra-low rates prevalent before 2022. Furthermore, as Brunel University analysis points out, the full impact of the higher mortgage rates that began their ascent in late 2021 has not yet been entirely absorbed by the market, with a substantial number of households still facing the prospect of transitioning to higher-rate deals in the coming years.¹⁴

The Persistent Affordability Crisis, Especially for First-Time Buyers (FTBs)

Despite the welcome easing in mortgage rates, housing affordability remains a formidable barrier for many, particularly first-time buyers. The Building Societies Association (BSA) underscores this challenge, reporting that 65% of aspiring FTBs identify mortgage affordability as their primary obstacle, while 62% cite the difficulty of accumulating a sufficient deposit.²⁰

The scale of this issue is further highlighted by BSA research indicating that an estimated 2.2 million “missing” first-time buyers have been priced out of the property market since 2006 due to these enduring affordability challenges.²⁰ The cost of purchasing a home relative to average incomes remains near record highs.² Data from the Office for National Statistics for 2024 showed that the median home in England cost 7.7 times median earnings.²

To navigate these financial pressures, many FTBs are resorting to longer mortgage terms. UK Finance data reveals that the average mortgage term for a first-time buyer has now stretched to over 31 years.²¹ This trend is a critical indicator of deep-seated affordability issues. While extending the loan period helps FTBs manage monthly repayments and gain a foothold on the property ladder, it significantly increases the total amount of interest paid over the lifetime of the loan. This practice could create longer-term financial vulnerability for a generation of homeowners, potentially reducing their capacity for future consumption, savings, and investment, and has broader societal implications for wealth distribution and retirement planning.

Brunel University analysis cautions that any benefits derived from reduced mortgage rates could be swiftly eroded by concurrently increasing house prices, thereby maintaining or even exacerbating the pressure on overall housing affordability.¹⁴

Lender Responses and Market Dynamics

In response to the evolving economic landscape, banks and building societies are anticipated to increase mortgage lending by approximately 11% in 2025. This is attributed to easing affordability constraints driven by falling interest rates and rising real wages.¹⁴

Property portal Zoopla has suggested that a potential relaxation in how lenders stress-test mortgage affordability could significantly boost prospective buyers’ purchasing power, by an estimated 15-20%.⁸ Currently, for a mortgage with an actual rate of 4.5%, many lenders are stress-testing affordability at rates between 8-9%. If this stress-testing threshold were relaxed to, for example, 6.5%, it would considerably improve borrowing capacity.⁸ However, such a policy change, while aimed at improving accessibility, carries risks. If not matched by a significant and concurrent increase in housing supply, the increased buying power could inadvertently fuel further house price inflation. This could negate some of the intended affordability benefits, particularly in high-demand areas, effectively being a demand-side solution to a problem with substantial supply-side components.²²

The Financial Conduct Authority (FCA) is expected to initiate a public discussion on the mortgage market. This review, which could potentially examine current loan-to-income (LTI) ratio restrictions, may lead to changes that benefit first-time buyers in the long term.²¹

BoE Rate Cuts & Mortgage Impact

• Bank of England Base Rate Cut: May 2025 – Down to 4.25% (from 4.50%) ¹¹
• Impact on Borrowers:
  • Tracker Mortgages: Rates decrease automatically (e.g., by 0.25%) ¹⁶
  • Standard Variable Rates (SVRs): Lenders passing on cuts (e.g., Halifax SVR to 7.74% from 7.99%; Nationwide SMR to 6.99% from 7.24%) ¹⁵
  • Fixed Rates: New deals becoming more competitive.
    • Best 2-yr fixed (60% LTV remortgage) around 3.87% ¹⁹
    • Best 5-yr FTB fixed (90% LTV) around 4.33% ¹⁹

A Tale of Two Markets: The Widening North-South Divide Intensifies

A defining characteristic of the UK housing market in 2025 is the pronounced and intensifying divergence in price performance between different regions, often broadly characterized as a North-South divide. While some areas, particularly in the north of England and other more affordable regions, are experiencing robust growth, London and parts of the South East continue to see more subdued activity.

Regional Price Performance – A Clear Divergence

Data from multiple sources consistently illustrates this regional disparity. According to provisional ONS figures for the 12 months to March 2025, the North East of England recorded the highest annual house price inflation at a striking 14.3%, though its average price remained the lowest at £168,000. In stark contrast, London experienced the lowest annual growth at just 0.8%.⁷ Across the constituent countries, England saw an average increase of 6.7% (average price £296,000), Wales 3.6% (£208,000), Scotland 4.6% (£186,000), and Northern Ireland a significant 9.5% (average price £185,000 in Q1 2025).⁷

Property consultancy Savills, referencing MoneyWeek, anticipates this pattern will continue through 2025, forecasting growth of 5% in the North West, North East, Scotland, and Yorkshire and the Humber. This compares with a more modest 2.5% growth predicted for the East of England and the South West.²

Zoopla’s data from April/May 2025 reinforces this trend, showing prices rising by 2.2% to 3% across the West Midlands, Northern regions, Wales, and Scotland, with Northern Ireland seeing growth around 6%. Conversely, annual price inflation was less than 1% across southern England, with the South East at 0.5%.⁸ At a city level, this translates to gains of over 5% in locations like Blackburn and Belfast, while some southern cities, such as Brighton and Aberdeen, have experienced modest price falls.⁹ Rightmove also publishes detailed regional asking price data in its full House Price Index, which typically reflects these broader trends.¹⁰ This pattern, where more affordable regions outperform London and the South East, has been evident for some time and appears to be solidifying as a key market feature.²

Underlying Drivers of Regional Disparities

The primary driver behind these significant regional variations is affordability. Richard Donnell, executive director of research at Zoopla, explicitly states, “Housing market activity and house price inflation are currently strongest in areas where homes are more affordable. In broad terms, this covers most areas outside the southern regions of England”.² London’s average house price, exceeding £552,000, has stretched affordability limits to their maximum for a large segment of potential buyers.² This pronounced North-South divide is increasingly viewed not merely as a cyclical trend but as a structural realignment of the UK housing market. Driven by maxed-out affordability in the South, this shift could have long-term implications for wealth distribution, population movement, and regional investment if it is sustained. It challenges the traditional notion of London as the primary engine of UK property wealth growth and could lead to a gradual rebalancing of economic activity if businesses and skilled workers increasingly relocate to more affordable regions.

Beyond general affordability, relative value and the potential for catch-up growth also play a significant role. Northern regions and other more affordable areas inherently offer better value for money, providing more headroom for price appreciation before hitting critical affordability ceilings.

Local economic factors and shifts in demand further nuance the regional picture. Zoopla highlights that rising employment growth in North West cities is boosting both demand and prices in those areas.⁹ Moreover, higher home values in major urban centres like Manchester are observed to be pushing demand into adjacent, more accessible, and affordable areas, thereby lifting prices in these commuter locations.⁹

Specific micro-market dynamics also contribute. Savills points to local markets such as Sevenoaks and Tunbridge Wells in Kent, which are bucking wider southern trends with positive annual house price growth. This is attributed to their access to good quality state education, particularly grammar schools, a factor gaining relevance amid discussions about potential VAT being added to private school fees.²⁴ This sensitivity of specific micro-markets to targeted tax changes or policy shifts suggests that national trends can be significantly disrupted or nuanced at a local level. For example, prime coastal homes have recently seen downward price pressure, partly due to increased council tax on second homes and stamp duty surcharges, correcting after a period of strong growth during the pandemic-era “race for space”.²⁴ This underscores the need for investors and homebuyers to look beyond headline regional data to understand hyper-local drivers, as niche factors can create distinct pockets of underperformance or overperformance.

Table 2: Regional Price Spotlight (Annual Change & Average Prices, March/April 2025)

(Note: ONS provides detailed English regional breakdowns. For brevity and focus on key examples from snippets, not all English regions are individually listed here but are encompassed by the England/UK averages. Zoopla also offers regional data ⁸ which shows similar trends.)

Supply, Demand, and Sales: The Market in Motion, Jolted by Policy

The dynamics of housing supply, buyer demand, and transaction volumes in 2025 paint a complex picture, heavily influenced by ongoing structural challenges in construction and significant jolts from fiscal policy changes.

Housing Supply – An Ongoing Challenge

The provision of new housing in the UK continues to fall short of both underlying demand and stated government targets. Data for England indicates that just over 204,000 new homes were completed in the 12 months to the first quarter of 2025, according to analysis of Energy Performance Certificate (EPC) data by Savills using MHCLG figures. This represents a 9% decrease year-on-year and marks the lowest level of completions since 2016.²³ Figures from building control inspections for the fourth quarter of 2024 showed 36,830 seasonally adjusted completions, also a 9% decrease compared to the same quarter in the previous year.²⁵

There are some tentative signs of a future pickup in delivery. Building control data for Q4 2024 recorded 30,860 seasonally adjusted starts, a notable 52% increase year-on-year.²⁵ National House Building Council (NHBC) data also suggests that new home starts were recovering in Q1 2025, although the rate of this growth appeared to be slowing.²³ However, the pipeline for future development is a concern. Approximately 225,000 homes gained full planning consent in England in the year to March 2025, according to HBF/Glenigan data cited by Savills, an 8% decrease from the previous year.²³ This figure is considerably below the government’s own calculation of housing need, which stands at 367,000 new homes per annum.²³ Broader government statistics show 241,000 units were granted planning permission in England in the year to December 2024, a 3% fall.²⁵ This contradiction between a rise in starts and a fall in planning consents is noteworthy. It could indicate that developers are expediting projects already in their pipeline, perhaps due to concerns about future economic conditions or policy shifts. However, the decline in planning consents is a more troubling long-term signal for sustained supply. If starts are increasing while the pool of land with development permission shrinks, a future bottleneck in completions could emerge once the current pipeline is exhausted, thereby exacerbating supply issues in the medium term unless planning approval rates see a significant upturn.

Government initiatives aim to address these shortfalls. Homes England, the government’s housing and regeneration agency, reported exceeding its 2024/25 targets by enabling the completion of over 36,000 homes (a 14% increase on the previous year) and facilitating the start of construction for an additional 38,000 homes (a 6% rise).²⁶ The Labour government has also pledged to deliver 1.5 million new homes over its five-year term.⁵ Nevertheless, significant constraints persist, including well-documented planning delays (cited by the Home Builders Federation as the greatest constraint on housebuilding ²³), high construction costs, and ongoing skills shortages in the building trades.¹⁴ The Prime Minister’s commitment to construct more affordable homes also faces practical challenges, such as the higher costs associated with developing on targeted “grey-belt” land.¹⁴

Property Transaction Volumes – A Volatile Picture

Residential property transaction volumes in the UK experienced a dramatic slump in April 2025. Seasonally adjusted figures show 64,680 transactions took place, which is 28% lower than in April 2024 and a staggering 64% lower than in March 2025.³ The non-seasonally adjusted figure of 55,970 transactions represented a 66% fall from March 2025.³

This sharp decline is directly attributed to changes in Stamp Duty Land Tax (SDLT) thresholds that came into effect on April 1, 2025. Buyers rushed to complete their purchases in March 2025 to take advantage of the more generous previous thresholds.¹ Indeed, owner-occupier completions in March were reported to be around twice as high as usual.³ The market’s extreme reaction to these SDLT changes, with a surge in March followed by an April slump, demonstrates how heavily transaction volumes are influenced by short-term fiscal policies. This suggests that achieving stable, organic market activity is challenging when subject to such policy-induced volatility, making long-term planning difficult for both the industry and consumers. Such boom-bust cycles in activity can distort price signals, place significant strain on conveyancing capacity ²⁷, and create broader market uncertainty. A more stable tax environment might foster healthier and more predictable market dynamics.

Despite this April dip, Nationwide commented that mortgage approvals data “suggests that market activity appears to be holding up well”.³ Property portal Zoopla also reported that the number of sales agreed was 6% higher than the previous year (based on April/May 2025 data) and projected an overall 5% increase in sales for 2025 compared to 2024.⁸

Buyer Demand and Seller Activity

The picture regarding buyer demand is somewhat mixed. The Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for March 2025 indicated that the net balance for new buyer enquiries slipped to -32%, the weakest reading since September 2023, with agreed sales also falling to a net balance of -16%.²⁸ The April 2025 RICS survey showed a further decline in buyer interest to a net balance of -33%, and agreed sales softened to -31%.²⁹

In contrast, property portals present a more resilient, albeit potentially slowing, demand picture. Rightmove’s May 2025 analysis noted that new home-buyer demand had slowed to +4% year-on-year after a busy March. However, the number of new sellers coming to the market was up by 14% year-on-year, creating what Rightmove described as a decade-high level of choice for buyers.¹⁰ Zoopla’s data for April/May 2025 also showed the supply of homes for sale was 12-13% higher than the previous year, while buyer demand in the early months of 2025 was running 10% above the prior year’s levels.⁸

This divergence between RICS data showing falling buyer demand and portal data indicating more resilient demand likely highlights different measurement methodologies and potentially different segments of the market being captured. RICS surveys reflect the sentiment and experiences of chartered surveyors, who are often involved at the point of serious enquiries, valuations, and agreed sales, and their feedback can be more cautious. Portal data, on the other hand, captures broader online search activity and initial enquiries, which may not all translate into committed offers. The increased supply of properties for sale noted by Rightmove and Zoopla might also be attracting more initial “window shoppers.” This suggests the market may be experiencing a rise in tentative interest, as reflected by portal activity, but a more cautious approach when it comes to making actual offers and proceeding to completion, as indicated by RICS. This could point to a “wait-and-see” attitude from many potential buyers despite the increased availability of listings. If new seller activity continues to outpace genuine buyer commitment, this increased choice could act as a moderating influence on price rises.

Revolution in Renting: Policy Overhauls Reshape the Private Rented Sector (PRS)

The UK’s private rented sector (PRS) is on the cusp of its most significant transformation in over three decades, driven by landmark legislative changes and new environmental standards.³⁰ These reforms aim to rebalance the relationship between landlords and tenants and improve housing quality, but they also introduce considerable new pressures and uncertainties for the market.

The Renters (Reform) Bill – A Paradigm Shift

The Renters (Reform) Bill (referred to by some sources as the “Renters Rights Bill,” likely indicating the same legislative initiative under the Labour government ³¹) is progressing through Parliament and is widely expected to receive Royal Assent by Summer 2025. Key provisions, most notably the abolition of Section 21 “no-fault” evictions, are anticipated to come into effect from October 2025.³⁰ The Bill successfully completed its Committee Stage in the House of Lords on May 15, 2025.³⁰

The Bill introduces several transformative changes:

• Abolition of Section 21 Evictions: Landlords will no longer be able to use “no-fault” Section 21 notices to regain possession. Instead, they will need to rely on strengthened Section 8 grounds, which require specific reasons for eviction.³⁰
• Periodic Tenancies as Standard: All new and existing tenancies will transition to periodic agreements, effectively ending fixed-term contracts. Tenants will gain the flexibility to give two months’ notice to leave at any point during the tenancy.³⁰
• New Ombudsman and Database: A new Private Rented Sector Landlord Ombudsman service will be established to resolve disputes, alongside a digital property database that landlords must join.³¹
• Decent Homes Standard: This standard, already applicable to social housing, will be extended to the PRS, mandating minimum conditions for properties.³¹
• Regulation of Rent Increases and Bidding: The Bill aims to tighten rules around rent increases and practices like rental bidding wars, potentially requiring landlords to publish the asking rent and not accept offers above it.³¹
• Limits on Upfront Rent: Landlords may be restricted from asking for more than one month’s rent in advance.³¹

Landlord Reactions and Market Impact

These sweeping changes are causing significant concern among landlords. Research cited by Lendlord.io indicates that 44% of UK landlords are planning to increase rents by an average of 6% ahead of the Bill’s full implementation. This figure is notably higher than the current inflation rate of 3.6% and is most pronounced in the South East, where 52% of landlords intend such increases.³⁰ This widespread intention to preemptively raise rents suggests that a considerable portion of the perceived costs of increased regulation and risk may be passed directly to tenants. This could, at least in the short term, undermine one of the Bill’s aims of improving tenant affordability and security, highlighting a potential unintended consequence where legislative efforts to protect tenants in a supply-constrained market lead to increased financial burdens for them.

RICS surveys reflect a continued decline in new landlord instructions, with a net balance of -24% reported in March 2025, worsening slightly to -26% in April 2025.²⁸ The National Residential Landlords Association (NRLA) highlights that the abolition of Section 21 and the capping of upfront rent fundamentally alter risk allocation for landlords. This makes robust tenant assessment and mechanisms for ensuring consistent rent flow, such as professional guarantor services, increasingly critical.³² Some analysts have suggested that the Bill, in conjunction with existing tax rule changes, could prompt more landlords to sell their properties, which would further constrict supply in the rental market.⁵

Soaring Rental Costs and Supply-Demand Imbalance

The rental market continues to be characterized by rapidly rising costs, driven by a persistent imbalance between strong tenant demand and insufficient supply. Provisional ONS data shows that average UK private rents increased by 7.4% in the 12 months to April 2025, with the average monthly rent reaching £1,335.⁷ While this annual growth rate was down slightly from 7.7% in March 2025, it remains exceptionally high. Regional variations are also stark: in the year to April 2025, rents in England rose by 7.5% (average £1,390), in Wales by 8.7% (average £795), and in Scotland by 5.1% (average £999).⁷ For Northern Ireland, rents were up 7.8% in the year to February 2025 (average £843).⁷

A Reuters poll from February 2025 predicted that national rents would rise by 4.0% in both 2025 and 2026, a rate that would outpace projected house price growth.⁵ The RICS survey for April 2025 confirmed strong tenant demand (net balance +14%) alongside declining landlord instructions (net balance -26%), with near-term rent expectations remaining firmly positive (net balance +25%).²⁹ This fundamental supply-demand imbalance is consistently identified as a key driver of escalating rental costs.⁵

New Energy Performance Certificate (EPC) Regulations – The Drive for Greener Homes

Adding another layer of complexity and cost for landlords are the upcoming changes to Energy Performance Certificate (EPC) regulations. The government plans to raise the minimum energy efficiency standard for privately rented homes in England and Wales from the current ‘E’ rating to a ‘C’ rating. The most frequently cited deadline for this upgrade is 2030 for all existing tenancies ³³, although some sources suggest an earlier deadline of 2028 might apply to new tenancies.³⁵

Compounding this is a planned major overhaul of the EPC assessment system itself, scheduled for 2026. This new system will introduce different metrics, reportedly focusing more on a property’s ability to retain heat rather than its overall energy consumption.³⁵ This impending change to the metrics before the main compliance deadlines creates significant uncertainty. Landlords investing now to achieve a ‘C’ rating under the current system face the risk that their efforts might not guarantee compliance under the new 2026 metrics. This could lead to wasted investment or encourage a “wait-and-see” approach, potentially delaying necessary energy efficiency improvements and creating a rush for upgrades closer to the final deadline, straining the retrofitting supply chain. Landlords are currently advised to focus on “small, incremental improvements” until there is greater clarity.³³

The financial implications of these EPC upgrades are substantial. Government data suggests an average cost of £6,864 per property to meet the new standards.³³ Other estimates place the cost of upgrading a property from an EPC rating of ‘D’ to ‘C’ at between £6,000 and £10,000, with older properties (pre-1940s) potentially requiring investments of up to £15,000.³⁴ Penalties for non-compliance are significant, with fines potentially reaching £5,000 per property, and proposed future legislation could see this rise to £30,000 for persistent breaches.³⁴

Despite these looming requirements, landlord preparedness appears low. One report indicated that 55% of landlords were unaware of the 2030 EPC ‘C’ requirement, and 40% had not yet undertaken any energy efficiency upgrades.³⁴ Goodlord’s research found that nearly one-fifth of landlords are unwilling to carry out the necessary upgrades.³³ The NRLA’s Spring 2025 consultation is actively seeking landlord opinions on these Minimum Energy Efficiency Standards (MEES) targets.³⁶ While the regulations aim to improve housing quality for tenants and contribute to reducing fuel poverty ³³, a significant majority of landlords (61.1%) and letting agents (57.7%) believe they will negatively impact the rental market.³³

The confluence of the Renters (Reform) Bill and the stringent EPC upgrade requirements is likely to accelerate the departure of smaller, private landlords from the PRS. These individuals may find the increased regulatory burden and capital expenditure difficult to manage. This could lead to a greater consolidation of rental stock in the hands of larger, corporate landlords who are better equipped to absorb compliance costs and navigate the new regulatory landscape. Such a shift could alter the character of the PRS, potentially leading to more professionally managed but possibly less flexible or higher-cost rental options for tenants. It might also cause a temporary reduction in overall rental supply if many landlords opt to sell their properties simultaneously, which could further exacerbate rent inflation in the short term.

Renters (Reform) Bill & EPC Deadlines: Key Changes for Landlords & Tenants

• Renters (Reform) Bill (Expected Royal Assent Summer 2025, Implementation Oct 2025 ³⁰):
  • End of Section 21 ‘No-Fault’ Evictions ³⁰
  • All Tenancies Become Periodic (ending fixed-term) ³⁰
  • New Private Rented Sector Landlord Ombudsman ³¹
  • Tighter Rules on Rent Increases & Bidding Wars ³¹
  • Limit on Rent in Advance (e.g., one month) ³¹
• EPC Minimum Standards (Private Rentals – England & Wales):
  • Current Minimum: ‘E’ Rating ³³
  • Proposed New Minimum: ‘C’ Rating
    • For new tenancies by 2028 (indicative) ³⁵
    • For all existing tenancies by 2030 ³³
  • EPC System Overhaul: Planned for 2026 with new performance metrics ³⁵

The Path Ahead: Outlook for H2 2025 and Beyond – Navigating Choppy Waters

As the UK housing market moves into the second half of 2025 and looks towards 2026, the prevailing sentiment among experts is one of cautious optimism for continued, albeit modest, house price growth. This outlook is largely predicated on the expectation of further interest rate cuts and a relatively stable labour market. However, significant headwinds and uncertainties persist, suggesting a potentially choppy period ahead.

Synthesizing Expert Views on Market Trajectory

The Royal Institution of Chartered Surveyors (RICS) indicates a cautious near-term sales outlook, with three-month sales expectations at a net balance of -18% in March and -15% in April 2025. However, their twelve-month expectations are mildly positive, improving from a net balance of +11% in March to +17% in April.²⁸ Importantly, twelve-month price expectations remain firmly in positive territory, with a net balance of +39% of surveyors anticipating price rises in both March and April surveys.²⁸

Property portal Zoopla expects overall market activity in 2025 to track levels seen in 2024. They project house price growth to slow to between 1% and 1.5% in the coming months but anticipate about 5% more sales transactions over the full year.⁸ Mortgage lender Nationwide maintains that despite wider economic uncertainties, the underlying conditions for potential homebuyers in the UK remain supportive.¹ Conversely, analysis from Brunel University characterizes 2025 as a year fraught with uncertainty, where interest rate movements will be the dominant factor influencing major housing decisions.¹⁴

Key Risks on the Horizon

Several key risks could derail the cautiously optimistic outlook:

• Persistent Inflation: If inflation proves more stubborn than the Bank of England’s central forecast, it could lead to delays or a reduction in the extent of anticipated interest rate cuts. This would keep mortgage rates higher for longer, impacting affordability.¹¹ Indeed, a Reuters poll found that over 90% of economists perceived the risks to their end-2025 inflation outlook as being skewed to the upside.⁵
• Deeper Economic Slowdown/Recession: A weaker-than-expected performance from the UK or global economy could negatively affect employment levels, wage growth, and overall consumer confidence, thereby dampening housing demand.¹¹ The Bank of England itself acknowledges downside risks to its GDP growth projections.¹³
• Global Shocks: Ongoing geopolitical tensions and the potential for escalating trade wars, such as those involving US tariffs, could exacerbate global inflation, potentially driving up interest rates or negatively impacting UK exports and economic growth.¹⁴
• Policy Missteps or Unintended Consequences: The full impact of the Renters (Reform) Bill and the new EPC regulations on rental supply, landlord investment behaviour, and rental affordability is yet to fully materialize. There is a risk that these significant policy shifts could lead to unintended market disruptions.⁵
• Affordability Ceiling: Even if interest rates fall, should house prices rise too quickly without corresponding growth in real wages, affordability will become even more stretched. This would act as a natural brake on the market, limiting further price appreciation.

Potential Upsides

Conversely, there are factors that could lead to a more positive outcome:

• Faster/Deeper Interest Rate Cuts: If inflation falls more rapidly than currently anticipated, the Bank of England might have scope to cut interest rates more aggressively. This would provide a stronger stimulus to the mortgage market and buyer demand.¹²
• Stronger Economic Recovery: A more robust pickup in both UK and global economic growth than currently forecast would likely boost consumer confidence and housing market activity.
• Effective Government Intervention: Successful implementation of well-designed government policies aimed at significantly boosting housing supply or providing targeted support for first-time buyers could improve market dynamics, although demand-side measures risk fueling prices further if not matched by adequate supply increases.

Concluding Thoughts – What This Means for Market Participants

The housing market in 2025 appears to be at an inflection point. The traditional wealth-generating capacity of property, particularly in southern England, is being severely tested by fundamental affordability limits that have been years in the making. This could signal a longer-term shift in how housing is viewed, moving from a primary investment vehicle for capital appreciation towards a greater emphasis on its role as a basic need. If property price growth remains subdued in large parts of the country due to these constraints, the appeal of property purely for capital appreciation may diminish, especially for highly leveraged investors. This could lead to different investment patterns and potentially more focus on rental yields or alternative asset classes.

For prospective buyers, 2025 presents a mixed picture. Easing mortgage rates offer some relief, but high prices and the challenge of saving for a deposit remain significant hurdles, especially for first-time buyers. The notable regional differences in price and affordability offer varied opportunities across the country. An increasing supply of homes for sale, as noted by portals like Rightmove and Zoopla ⁸, provides more choice but also necessitates careful consideration of local market conditions.

Sellers in many regions, particularly outside of London and the South East, may find conditions remain relatively favorable. However, with increased choice available to buyers, realistic pricing strategies will be crucial for securing a sale.⁸

Homeowners on variable-rate mortgages or those approaching a remortgage period are likely to benefit from the Bank of England’s rate cuts. Overall housing equity is expected to see modest growth in most areas.

Renters are likely to face continued high rental costs and a market in significant flux due to the major regulatory changes underway. The promise of enhanced rights and better property standards under the Renters (Reform) Bill and new EPC regulations comes against a challenging backdrop of rising living costs and the potential for a shrinking supply of properties from private landlords.

Landlords are navigating a period of profound regulatory change and mounting cost pressures. Strategic decisions regarding investment levels, property upgrades to meet new standards, and overall risk management are now paramount.³²

Ultimately, the UK housing market’s future trajectory in 2025 and beyond appears increasingly dependent on a complex, almost precarious, alignment of multiple factors: successfully controlled inflation, continued wage growth that outpaces or at least matches house price rises, carefully managed interest rate reductions by the Bank of England, and the successful navigation of major regulatory reforms without derailing housing supply. A significant deviation in any one of these critical components could disproportionately impact market stability. The market currently lacks strong, independent drivers of growth and is instead reliant on a “just right” confluence of conditions. This makes it more vulnerable to shocks and suggests that forecasts should carry wider confidence intervals than in more stable periods. Policymakers, in turn, face an exceptionally delicate balancing act in steering the economy and the housing market through these choppy waters.

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Works cited

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Disclaimer:

This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.

While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.