UK House Prices Edge Up and Mortgage Price War Intensifies amid Expectations of December 2025 Bank of England Rate Cut

UK house prices rose modestly in November, even as the mortgage market braces for further rate cuts — creating a competitive environment that is reshaping the outlook for buyers, remortgagers and landlords alike. With lenders slashing their rates ahead of a likely cut by the Bank of England (BoE), the conditions for borrowers are improving — though underlying risks remain.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What The Latest House Price Data Shows

• According to the most recent data from Nationwide Building Society, UK house prices increased by 0.3% in November 2025.

• On an annual basis, prices rose by 1.8%, up from 2.4% in October — a pace still modest but better than many economists had forecast.

• The increase suggests a stabilising market: despite economic uncertainty and fiscal changes from the Autumn Budget, buyer demand has shown resilience.

Recent data from the HM Land Registry (August 2025) also reported a 3% rise in UK-wide prices over the previous 12 months. Regional variations remain notable: northern areas such as the North East saw stronger annual growth, while London continued to lag.

These findings point to a housing market that — while far from buoyant — is holding up better than many had feared, even as consumers and investors digest the broader economic backdrop.

Why House Prices Are Rising Even As Rates Remain High

Wage growth and demand outpacing mortgage costs
Many buyers appear willing to accept higher mortgage rates in exchange for relatively stable house prices — a trade-off that is holding up better than previous cycles. As real incomes rise modestly, the impact of higher borrowing costs seems less severe than it might have been a year ago.

Psychological effect of imminent rate cuts
With markets widely expecting the BoE to cut the base rate in December — possibly to 3.75% — many potential buyers may be stepping into the market in anticipation of cheaper borrowing ahead. This “buy before price runs up” mentality can itself help support prices.

Supply constraints and fiscal-policy headwinds
The government’s Autumn Budget introduced higher taxes on property income and a “mansion tax” on very high-value homes — moves likely to discourage some buy-to-let investors. As smaller landlords exit the market, supply could tighten further, supporting prices even if demand weakens elsewhere.

Mortgage Price War: What’s Fueling It & What It Means

Lenders Competing Ahead Of Expected Rate Cut

Even though the BoE held the base rate at 4% in its November 2025 meeting, the vote was close (5–4), signalling a strong lean toward a cut in December. Lenders have already responded — with some two-and five-year fixed-rate deals reportedly dropping below 3.6%, the lowest rates since 2022.

More Choice For Borrowers

For borrowers remortgaging, moving home or entering the market for the first time, this surge in competition between lenders can translate into better deals, lower monthly payments and reduced overall borrowing costs — especially if a rate cut materialises.

But Don’t Expect Rates To Plunge Overnight

Many forecasters caution that while rates may fall, dramatic reductions are unlikely in the short term. The market has already priced in most of the expected cut.

Broader Economic And Policy Drivers

Inflation And The BoE’s Mandate

Inflation has eased considerably from its 2023–2024 highs, which initially prompted a series of base-rate hikes. The BoE has now signalled a willingness to gradually reduce rates as inflation continues to approach its 2% target.

The Impact Of The 2025 Autumn Budget

The recent Budget introduced higher property income taxes and a new levy on high-value homes. These changes are expected to reshape the buy-to-let sector — potentially removing smaller landlords and reducing rental supply. For homebuyers this could sharpen competition, especially in mid-price segments, and support further price stability or growth.

Structural Supply Issues

Longstanding issues in housing supply and delays in planning approvals continue to restrict new builds. According to recent commentary from developers and industry observers, improved mortgage availability via rate cuts may not be sufficient to boost supply fast enough — reinforcing the supply–demand imbalance in many regions.

What This Could Mean For Different Groups

First-Time Buyers
Modest house-price increases combined with better mortgage deals may make now a reasonable time to explore buying — though affordability remains tight, especially in high-demand areas.

Remortgagers and Home Movers
Those coming to the end of fixed-term deals may benefit from lower rates and wider choice. A remortgage now could lock in a competitive rate before potential rate cuts make deals more expensive again if demand spikes.

Buy-to-Let Landlords
Tax changes could reduce net returns. Those relying on rental income may struggle with lower yields and higher costs — potentially prompting more disposals, which may further tighten rental supply and push rents up.

Buyers in Higher-Value Markets (e.g. London)
Price growth remains weak in expensive regions. Combined with looming tax changes on high-value homes, there is increased uncertainty — so potential buyers may adopt a wait-and-see approach.

Key Numbers At A Glance

• UK average house price (November 2025): £272,998

• November 2025 monthly house price growth: +0.3%

• Annual house price growth: +1.8%

• Bank of England base rate: 4.00%

• Some fixed-rate mortgage deals available below 3.6%

Figures as of 2 December 2025 London

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One we can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1. Is now a good time to buy a home given rising house prices and lower mortgage rates?
   There are promising signs: modest price increases, competitive mortgage deals, and expectations of further rate cuts. That said, affordability remains fragile — especially in high-price areas — so it depends heavily on your budget and deposit size.

2. Should I wait for the Bank of England rate cut before locking in a mortgage?
   Possibly — but many lenders have already passed on lower pricing. Waiting could expose you to higher house prices if demand surges. A qualified mortgage adviser can help you weigh the trade-offs.

3. Will buy-to-let remain viable under the new tax regime and market conditions?
   The outlook is more challenging. Higher property-income taxes and expected downward pressure on yields may deter smaller landlords, potentially reducing rental supply but also increasing risk for landlords.

4. Could house prices fall if mortgage rates stay high or increase again?
   Yes — if borrowing costs rise or economic conditions worsen, demand could weaken. However, tight supply and structural demand pressures may cushion a sharp price drop.

5. What does this mean for remortgaging in 2026?
   Remortgagers may benefit from lower rates as the Bank of England cuts rates and lenders compete. Locking in a competitive fixed rate now — or shortly after a cut — could be advantageous depending on your deal expiry date.