Momentum continues to gather in the UK housing market as we approach spring, with lower interest rates attracting a wider range of buyer types. Jonathan Fowler of Fowler Smith Mortgages & Protection looks at the trends.
Over the last month, we’ve seen many lenders reducing some of their mortgage product rates. This follows the most recent base rate reduction on 5th February, to its current position of 4.5%. We’ve also seen 5-year SONIA swap rates come down, currently sat at 3.887% as of 27th February 2025.
This downward trend is widely reported, and coupled with lenders seeming to consistently reduce some of the product interest rates they have on offer, I feel that we’ll see demand to continue to pick up. The Guardian have also reported that house prices have increased for six straight months in a row, despite some of the affordability challenges that we’re all aware of – energy cap rises, and so on.
I’m hearing more and more from lenders that they’re wanting to lend more as a whole this year, and boost their market share. With this considered, especially on the residential side of the mortgage market, we’re seeing some lenders offer an increase in loan to income multiples to achieve stronger affordability for clients.
Investors attracted by lower interest rates
On the buy-to-let side, a decrease in interest rates will often boost affordability immediately – as where a lender calculates a loan amount based on the rental income expected along with the product pay rate, any decrease will boost lending amounts. This is hugely welcomed, and hopefully will continue to make buy-to-let investments more achievable going forwards.
Within our firm, interestingly we’ve seen a healthy mix of investors throughout February – between portfolio and first-time landlords. Even with the changes to stamp duty, it seems as though many feel that property investment is still a suitable way forwards, and with the positivity in the market at present is only likely to push this further.
We’re also seeing a mix of investment types – new-build purchases, HMOs and an increasing interest within the Multi-Unit Freehold Block space; where a building has a number of self-contained apartments within it. There’s still an interest for the longer-term tenancy type, such as a property being let via a corporate tenancy to a charity or social housing provider – as there’s still seemingly a strong need for this, and some more specialist lenders are able to consider such tenancy types.
Strategic investments
With more companies and corporations changing their stance on the ‘remote’ work or hybrid model, I predict that we’re likely to see investors wanting to make buy-to-let purchases within city centres to cater for professionals needing good transport links or being within easy reach of their respective offices.
Or even HMOs close to good transportation links so that professionals can rent a well-equipped room that allows for a manageable commute. Savvy investors will always look to get ahead of the market, and many will be watching further-spread activity and making judgement based upon landscape predictions.
On the whole, I feel that, even with the stamp duty deadlines coming to an end in March, we’ll hopefully see a positive Spring season. If interest rates continue to reduce, demand should continue to rise. Landlords will continue to seek out lucrative opportunities, and it appears that lenders are there to support this, too.
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