Should I Buy My First Home in 2025?

Current Market Trends

The UK housing market has been on a rollercoaster recently, but as of late 2024, there are signs of stability. House prices have grown by 3.7% annually, marking the fastest growth rate in two years. The average property price now stands at £268,144, just shy of its all-time high. Regional variations mean some areas, particularly in the North West and Midlands, are seeing even faster growth.

This resurgence is driven by a strong labour market and wage growth, which has boosted buyer confidence. However, affordability remains a challenge for many, making it essential to evaluate your financial readiness before buying.

Forecasts for 2025

Experts predict a 2.5% increase in house prices throughout 2025. This is slower than in recent years but still indicative of a competitive market. Regions such as the North West, Wales, and Scotland are expected to outperform the national average, making them attractive options for first-time buyers.

With high demand, especially in urban areas and growing regional hubs, first-time buyers may face stiff competition. However, slower growth may provide a more balanced market compared to the rapid rises of previous years.

Government Schemes for First-Time Buyers

First Homes Scheme

The First Homes Scheme offers new-build properties at a 30%-50% discount to local first-time buyers and key workers. To qualify, your household income must be under £80,000 (£90,000 in London), and you'll need to secure a mortgage for at least 50% of the property price. This scheme can significantly reduce the cost of purchasing your first home in high-demand areas.

Mortgage Guarantee Scheme

Extended until June 2025, the Mortgage Guarantee Scheme enables buyers to secure a home with just a 5% deposit. This scheme is ideal for those with limited savings, offering access to 95% loan-to-value mortgages. It's a valuable option for first-time buyers looking to enter the market sooner rather than later.

Interest Rates and Affordability

As of late 2024, the Bank of England has begun cutting interest rates, reducing the base rate to 4.75%. Further reductions are expected in 2025, which could make mortgages more affordable. Lower rates mean reduced monthly payments, potentially increasing your buying power.

Fixed-rate mortgages appeal to first-time buyers, offering stability in uncertain times. However, exploring variable-rate options with a mortgage advisor can help you find the best deal based on your circumstances.

Stamp Duty Considerations

Changes to stamp duty are set to take effect in April 2025. First-time buyers will face new charges on properties valued above £425,000. Acting before April could save you thousands if you're considering a purchase in this price range. For homes under £425,000, current exemptions and reduced rates will remain in place, easing the financial burden for many first-time buyers.

Regional Considerations

Choosing the right location is key to a smart property investment. Regions like the North West, Midlands, and Wales offer a mix of affordability and growth potential. Cities like Manchester and Liverpool are seeing increased demand due to strong job markets and infrastructure investment. Meanwhile, areas like Glasgow and Edinburgh continue to attract buyers with their cultural appeal and steady house price growth.

Preparing to Buy Your First Home

Evaluate Your Finances

Before entering the market, assess your savings, monthly income, and expenses. Aim to save at least 5% for a deposit, but remember that a larger deposit can secure better mortgage terms.

Understand Your Credit Score

A strong credit score increases your chances of securing a mortgage with favourable terms. Review your credit report and address any issues before applying.

Research Support Schemes

Explore government initiatives like the First Homes and Mortgage Guarantee schemes to see if you qualify for additional support.

Plan for Additional Costs

Remember to budget for additional expenses such as legal fees, surveys, moving costs, and potential stamp duty.

Buying your first home in 2025 could be brilliant, particularly with government schemes, potential interest rate cuts, and moderate house price growth. However, it's essential to carefully evaluate your finances, research the market, and act strategically to secure the best deal. Consulting a mortgage advisor or financial expert can provide valuable guidance tailored to your situation.