The United Kingdom's inflation rate has been on a steady rise, reaching 2.6% in November 2024, up from 2.3% in October and 1.7% in September. This increase has put significant pressure on the Bank of England's Monetary Policy Committee (MPC) as they strive to meet their target inflation rate of 2.0%. The MPC's decisions on interest rates are crucial, as they directly impact borrowing costs for consumers and businesses, including mortgages and remortgages.

The UK housing market in 2025 is poised for a year of sustained demand and continued growth in average house prices, driven by a combination of favorable factors that promise to keep the market buoyant. Lower mortgage interest rates offered by lenders and rising wages are expected to play a significant role in maintaining elevated levels of buyer interest and activity throughout the year. The favorable factors will also contribute to high demand from homeowners seeking lower interest rate remortgages in the new year.

Homeowners are putting in the effort to remortgage and the increase of 13% completions comes during the normal seasonal remortgage boom according to data from LMS and their Monthly Remortgage Snapshot. In November, there was an average increase of £321.40 added to monthly repayments. Over 50% of homeowners increased their loan size, though this is not a necessary requirement of remortgage. It is likely that there were homeowners who came to the end of their mortgage term obtained when interest rates were lower such as they were in 2022. Some homeowners might have chosen to increase their repayments and use the extra to pay down their debt faster or obtain funds to make improvements or upgrades to their property. 

Today, in an expected decision, the Bank of England's Monetary Policy Committee (MPC) opted to maintain the standard base interest rate at 4.75%. This decision came as no surprise to financial analysts and market observers, following the inflation report released yesterday that indicated the second consecutive month of inflation growth. Inflation has grown from 1.7%, to 2.3% in the twelve months to October, and then 2.6% in the twelve months to November, which was reported yesterday.

The UK housing market is set to experience notable fluctuations in the coming year, driven by various factors such as interest rates, stamp duty changes, and economic conditions. According to Nationwide's recent forecast, the average house price in the UK could see a growth of up to 4% in 2025, adding approximately £10,725 and bringing the average price to £268,144. Even at the lower end of their forecast, a 2% increase is expected. This prediction comes on the heels of a significant uptick in the market, where the average house price increased by 1.2% in the last month alone—the largest monthly rise since March 2022—and an annual growth of 3.7%, marking the most substantial increase in two years.

In anticipation of the upcoming meeting of the Bank of England's Monetary Policy Committee (MPC), the focus is squarely on the state of the economy and the decision regarding the standard base interest rate. The committee's deliberations are highly anticipated, as they will shape the monetary landscape for the near future.