Where to Invest for the Best Rental Returns in the UK

September 22, 2025Newsletter

We break down the highest-yielding property markets across the UK to help you make smarter investment choices.

Ready to become a landlord and want the biggest return on your investment?

It’s worth getting to grips with rental yield if you’re purchasing a buy-to-let property.

Gross rental yield is the annual rental income expressed as a percentage of the property price. Net rental yield also factors in the cost of maintaining and renting out the rental property. Both can help you decide if a property is a good investment.

The average gross rental yield in the UK is currently 5.8%. This is based on the average buy-to-let property costing £270,045 and the UK’s average rent being £1,301, according to our latest data.

Gross yields have improved across all regions in the last year as house prices have started to fall or remained the same while rents have continued to rise.

Keep in mind that tenant demand and the potential for house price growth - among other factors - should also be considered with property investment.

Top cities for rental yields in the UK

Sunderland, Aberdeen and Burnley top the chart for the highest rental yields in the UK, with average gross yields over 8%.

The top 17 cities for rental yields in the UK are all in the North of England and Scotland. In contrast, southern cities tend to have much higher house prices, bringing the gross yield down for buy-to-let properties.

Here’s how every city in the UK compares for gross rental yield.

Top regions for rental yields in the UK

Rents in the North East are cheaper than anywhere else in the country (£748) - and so are buy-to-let properties, at £114,098 on average. This gives the region the highest average yield in the UK of 7.9%.

It’s followed by Scotland (7.6%), the North West (6.8%), Wales (6.5%) and Yorkshire and the Humber (6.5%). Gross yields in these regions have risen over the last 3 months as rents have risen faster than house prices.

London offers the lowest gross yields in the UK of 5.1% on average, only 0.1 percentage point higher than 3 months ago. With higher mortgage rates, new regulations and low house price growth in recent years, rents appear to have reached an affordability ceiling and tenant demand is starting to moderate.

The East of England and South East also offer lower gross yields of 5.6%. However, their rental yield has improved on last year as they are the two regions where house prices have fallen the most.

The highest yielding areas in each part of the UK

Looking for a buy-to-let property near where you live can be useful. You know the area, understand local influences on the market and can work closely with a nearby letting agent.

So it helps to know which parts of your region offer the greatest rental yield. Here are the top 3 local authorities for average yields in each UK region.

North East: 7.9% average gross yield

• County Durham: 8% gross rental yield

• Darlington: 7.8% gross rental yield

• Gateshead: 8% gross rental yield

Scotland: 7.6% average gross yield

• Renfrewshire: 9.5 gross rental yield

• East Ayrshire: 10% gross rental yield

• West Dunbartonshire: 9.2% gross rental yield

North West: 6.8% average gross yield

• Burnley: 8.2% gross rental yield

• Blackpool: 7.2% gross rental yield

• Preston: 7.2% gross rental yield

Wales: 6.5% average gross yield

• Blaenau Gwent: 7.6% gross rental yield

• Neath Port Talbot: 7.5% gross rental yield

• Merthyr Tydfil: 7.2% gross rental yield

Yorkshire and the Humber: 6.5% average gross yield

• Hull: 8% gross rental yield

• North East Lincolnshire: 7.7% gross rental yield

• Barnsley: 7.3% gross rental yield

West Midlands: 6.2% average gross yield

• Stoke-on-Trent: 7.5% gross rental yield

• Coventry: 6.7% gross rental yield

• Newcastle-under-Lyme: 6.7% gross rental yield

East Midlands: 6% average gross yield

• Nottingham: 6.6% gross rental yield

• Mansfield: 6.5% gross rental yield

• Boston: 6.6% gross rental yield

South West: 5.6% average gross yield

• Plymouth: 6.4% gross rental yield

• Gloucester: 6.8% gross rental yield

• Swindon: 6.3% gross rental yield

South East: 5.6% average gross yield

• Southampton: 6.6% gross rental yield

• Gosport: 6.46% gross rental yield

• Portsmouth: 6.45% gross rental yield

East of England: 5.6% average gross yield

• Great Yarmouth: 6.4% gross rental yield

• Peterborough: 6.24% gross rental yield

• Fenland: 6.17% gross rental yield

London: 5.1% average gross yield

• Barking and Dagenham: 6.22% gross rental yield

• Newham: 6% gross rental yield

• Bexley: 5.8% gross rental yield

What’s the outlook for buy-to-let property investment in the UK?

Supply and demand are coming back into balance, but the unaffordability of home ownership is trapping people in private renting, which is keeping rental demand above pre-pandemic levels.

It’s positive that the number of homes for rent is steadily recovering. However, we don’t expect a surge of new investment activity by landlords to accelerate the supply of homes for rent.

Rental inflation remains on track to be 3% over 2025. Encouraging new investment and growing the supply of homes for rent is the only long-term solution to easing the pressure on renters across Britain.

The outlook for buy-to-let investment remains closely tied to house prices, which are projected to experience modest growth in 2025. With rents generally rising at a slower pace than house prices, gross rental yields are expected to stabilise or see a slight increase, depending on regional dynamics and investor strategies.

What is rental yield?

Rental yield is the amount of money you make from a rental property each year against the cost of purchasing and running it. It’s always expressed as a percentage.

The gross yield only takes the cost of the property and the rental income into account.

The net rental yield, on the other hand, considers the extra costs of running the property, like maintenance and property management.

To figure out the best investment property for you, it’s worth looking at both of these yields as well as other factors.

Why is rental yield important?

Before you jump into buying a property to rent out, you've got to figure out if it’s a worthwhile venture.

If your rental income doesn't cover your costs, or you're just breaking even, unexpected expenses like fixing a broken boiler or a leaky roof can impact your finances.

So looking at the potential rental yield will help you do the maths and make sure it’s a good investment.

What else to think about with a buy-to-let property

There’s more to choosing a good buy-to-let property than just the rental yield.

You could buy a property with a strong yield, but if house prices aren’t rising or you can’t find tenants, it might not be the best investment.

House price trends

Get a feel for house price growth to see if the property is likely to rise in value. Look at historic sale prices for individual properties as well as value increases for the postcode and local area.

The cost of a buy-to-let mortgage

At the same time, you need to think about the costs of taking out a buy-to-let mortgage and all the other associated costs of running a rental property.

Tenant demand

It also helps to understand what tenant demand is like in the area and what sort of properties they’re looking for.

Speak to a letting agent to find out what’s happening in the local rental market. They’ll be able to share what tenants are looking for and which properties could be a strong buy-to-let investment.

How to work out your gross rental yield

Let’s say you want to buy a property worth £200,000. You plan to charge £1,000 per month in rent, which works out to £12,000 per year. Divide 12,000 by 200,000, then multiply by 100. That equals a gross yield of 6%.

(Annual rent / property value) x 100 = gross rental yield

How to work out your net rental yield

To work out your net rental yield, you need to take your extra costs off your annual rental income.

So add up the amount of money you think you’ll spend over the year. This will include paying the mortgage, agency fees, property maintenance, and any costs you might incur to keep up with regulations.

Then deduct these costs from your annual rental income, and do the same sum from there.

[(Annual rent - annual costs) / property value] x 100 = net rental yield

Let’s say you’re buying the same £200,000 property and charging the same £12,000 per year in rent.

But you’re spending £300 on maintenance and agency fees, which comes to £3,600 over the year.

That means your net rental yield for this property is 4.2%.

Key takeaways

• If you’re looking for a buy-to-let property, rental yield can help you decide if the cost of the property is worth the potential rental income
• Gross rental yields have increased in the last year as rents have risen at a faster rate than house prices
• The highest yielding cities in the UK are Sunderland, Aberdeen and Burnley, which offer average gross yields of 8%+
• The North East is the best region for investors looking for strong yields, offering an average of 7.9%
• We reveal the three highest yielding areas in every region of the UK
• Take other factors into account before you invest, like tenant demand and the potential for future house price growth

 

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by Blackstones

Scrap Stamp Duty? Our Take on the Rumoured Property Tax Shake-Up

September 22, 2025Newsletter

Rumours are circulating that stamp duty could soon be scrapped — replaced by a completely new property tax system. But how likely is this change, and what would it mean for buyers and sellers?

Here’s our breakdown of the speculation, what it could mean for the housing market, and our view on whether this would be good news for homeowners.

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What Property Tax Changes Are Being Discussed?

At the moment, nothing is confirmed, but the proposals being talked about include:

• Replacing Stamp Duty Land Tax (SDLT) with an annual property tax on homes sold for more than £500,000

• Charging capital gains tax (CGT) on the sale of homes worth more than £1.5 million

• Revaluing council tax bands, which are still based on 1991 property values

These ideas often appear in the run-up to the Autumn Budget, with ministers looking for ways to boost market activity, encourage moving, and raise revenue.

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How Property Tax Works Today

Currently, there are three main ways the government collects tax on property:

• Stamp duty – paid when you buy a property.

• Council tax – paid annually to your local authority, based on 1991 property valuations.

• Capital gains tax – paid on property profits, but only on second homes and investments (not your main residence).

Stamp duty is often described as a major barrier to moving, especially in areas with high house prices like London and the South East.

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Who Pays Stamp Duty Right Now?

We’ve analysed who is paying stamp duty today, compared with earlier this year when tax reliefs were still in place.

• 83% of homeowners now pay stamp duty when they move (up from 49% before April 2025).

• 41% of first-time buyers now pay stamp duty (up from 20% before April).

• The burden is heaviest in London, where 97% of homeowners and 79% of first-time buyers pay stamp duty.

London and the South East together account for 60% of all stamp duty payments across England.

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The Case for Scrapping Stamp Duty

✅ Removes barriers to moving – encouraging transactions and improving labour mobility.
✅ Boosts housing market activity – particularly in the mid-market price range up to £500k (two-thirds of UK sales).
✅ Supports housebuilding – helping the government reach its target of 1.5 million new homes by 2029.
✅ Improves affordability for first-time buyers – particularly in London and the South East.

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The Potential Downsides

⚠ £10+ billion revenue gap – stamp duty currently raises more than £10bn a year.
⚠ Bigger burden for London & South East homeowners – 1 in 3 would pay an annual property tax.
⚠ Market distortions – expect a “cliff edge” around the £500k price point, with demand bunching just below the threshold.
⚠ Short-term disruption – buyers and sellers could pause decisions while they wait for clarity.

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Capital Gains Tax on Main Residences

Introducing CGT on homes worth more than £1.5m would be a major change.

Only 4% of homes are currently worth more than £1.5m, but this would disproportionately hit London homeowners — and could raise fears that the threshold might be lowered in future.

Main residence CGT relief is currently worth £36bn a year, so even a partial removal would be a major policy shift with big political implications.

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Changes to Council Tax

A revaluation of council tax bands could “tidy up” the system, but unless new higher bands are introduced, it is unlikely to raise enough revenue to replace stamp duty.

Any changes here would again have the greatest impact in higher-value areas.

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Our View

Scrapping stamp duty would be welcomed by many buyers and sellers and could inject life into the housing market — especially for properties priced under £500k.

However, an annual property tax could become a long-term burden, particularly in London and the South East where prices are higher, and risks dampening demand where the market has already been flat for a decade.

The biggest question remains: how will the government replace the £10+ billion currently raised by stamp duty each year? Until we have answers, the market is likely to remain cautious — and we could see a short-term slowdown as people wait for clarity.

Key takeaways

• There has been a lot of speculation about possible changes to property taxes in the Autumn Budget, which is common ahead of any Budget
• The speculation is linked to recent reports published by various think tanks
• One idea is to replace stamp duty with a new annual property tax on homes sold for more than £500k
• Another is to tax sellers on the capital gains they make from selling their main residence if it's worth more than £1.5m
• Reforms to encourage market activity and remove barriers to homeownership are welcome
• But speculation can be unhelpful for those in the middle of buying a home or making an offer
• And remember, most speculation stays as just that - and doesn’t turn into the reality
• We dive into who currently foots the UK’s stamp duty bill and who would benefit from changes to the property tax system

 

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by Blackstones

UK House Prices Soar: Average Home Up £55,800 in 5 Years

July 21, 2025Newsletter

The average UK homeowner has gained £55,800 on their home’s value since June 2020. How does your home compare? Let’s find out.

New data uncovers just how much UK house prices have climbed since the pandemic — and the numbers may surprise you.

Since 2020, the average UK homeowner has enjoyed a 20% increase in property value, equating to a gain of around £55,800.

For many, the rise has been even more dramatic. Around 1 million properties have surged by over 50% in value, with an average increase of £117,400.

Overall, four out of five homes — roughly 24 million across the UK — have seen their value grow by at least 5%, adding an average of £60,800 in just five years.

How have property values changed in your region?

So what does it mean for those lucky enough to gain 50%+ in their home's value? We've broken down how the added value works out in pounds and pence across the UK.

Not bad reading for homeowners.

The home value winners: Northern England and Wales

More than half of the UK homes with 50%+ value gains are in the North West, Yorkshire and the Humber, and Wales.

In the last 5 years, homes with 50%+ value growth saw average gains of:

• £90,700 in Wales

• £86,200 in Yorkshire and the Humber

• £77,100 in the North West

The level of property value growth here is down to a combination of factors. The pandemic prompted lifestyle changes and new buyer requirements, boosting interest in previously overlooked areas.

At the same time, huge rental growth in cities and the late-2022 spike in mortgage rates has encouraged people to prioritise affordability and buy in lower-value areas.

This means that the most affordable areas have seen above-average buyer interest, pushing house prices up.

Growth hotspot: The South Wales Valleys

The Valleys area of South Wales has become a seriously sought-after spot in the last 5 years, driven by its unique combination of excellent value for money and close proximity to Cardiff.

Blaenau Gwent and Merthyr Tydfil have seen 3 in 10 homes increase in value by 50% or more over the last five years, an average of £51,100 and £49,900 respectively.

Growth hotspot: The North West

Urban areas in the North West have seen impressive house price growth since 2020, particularly in Liverpool, Manchester and the surrounding areas.

Homeowners in Rochdale, Bolton and Oldham are most likely to have seen their property’s value surge by 50% or more, with average gains of £64,300, £64,300 and £62,900 respectively.

The home value losers: London and the South of England

Okay, we don’t mean it when we say ‘losers’ - but there’s a chance your home has lost value since 2020 if you live in the South of England.

The good news is that value losses are pretty limited. In fact, most southern homes have seen small value increases since the pandemic, particularly as the London ‘virtual’ commuter belt has expanded - they’re just not as high or widespread as in Wales and the North.

London: Property values fall in inner boroughs

The value losses have mainly happened in London, where 13% of homes have lost 5% or more - an average of £34,000.

Westminster and Kensington & Chelsea are the worst off, with almost half of all homes now valued below their June 2020 estimates.

On the flip side, the previous exceptional value growth in these areas will offset much of these house price losses for many homeowners.

London’s housing market has faced challenges in recent years, with high house prices and mortgage rates impacting first-time buyer demand and rate and tax changes discouraging landlord investment.

South of England: Small gains work out to big cash boost

The South of England has seen modest value growth, with 51% of southern homes gaining up to 20% in value. These rises have averaged £62,000.

The lower growth is a result of house values already being higher in the south, along with high mortgage rates impacting demand and keeping values steady.

The homes that gained more value tend to be located in desirable coastal spots and areas of natural beauty. The Isle of Wight is one example, where homes with 50% gains added £182,400 on average.

And although the percentage increase is lower, high house prices equate to a huge cash boost in the South East, with homes now worth £62,000 more than 5 years ago on average.

 

Let’s zoom in: The local areas with the most property value gains

We’ve also looked at the UK local authority areas with the highest percentage of homes that have gained 50%+ in value since 2020.

Widespread property value gains in smaller markets point towards consistent value growth that’s likely to convert to higher sale prices.

Does your area make the top 10 for value growth in the UK?

The expert’s advice: “It’s critical to understand your local market dynamics when moving”

Richard Donnell, Executive Director at Zoopla, reflects on the research, adding some advice for those thinking about moving.

“Our latest analysis clearly shows there is no single housing market and that house price trends vary widely across the UK.

“1 million UK homes have seen their value increase by 50% or more over the last 5 years as higher mortgage rates and rising rents encourage home buyers to seek out value for money in localised markets across northern England and Wales.

“Home value growth has been weaker across southern England and particularly in London.  A combination of high prices and higher mortgage rates have reduced buying power and this has been reflected in flat prices and modest price falls in inner London.

“The UK currently has the most homes for sale in 7 years. It’s critically important that serious sellers fully understand the local market dynamics impacting the value of their home and seek the advice of agents on where to set their asking price in order to achieve a sale."

 

Key takeaways

• The average UK home has gained 20% or £55,800 in value since the market reopened after the Covid-19 pandemic
• 1 million UK homes are now worth 50% more - an average gain of £117,400
• The North West has seen the most homes gain at least 50% in value during that time
• London is the worst off with 13% of homes losing 5%+
• Homes in the south of England have seen modest increases, with half gaining up to 20% in value

 

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by Blackstones

Is Your Childhood Town Still Affordable? A Look at UK House Price Shifts

June 30, 2025Newsletter

Two decades of rising house prices may be pricing Brits out of the places they once called home.

Ever dreamt of moving back to your childhood hometown, perhaps to walk the same streets, pop into the corner shop that sold your favourite sweets, or raise a family where you grew up?

You’re not alone. Over half of Brits (52%), say they’d consider returning to the area they grew up in. But for many, that heart-warming vision clashes with a hard-hitting reality: they simply can’t afford it anymore.

Our latest research reveals that average UK house prices have jumped by 74% over the past two decades, rising from £113,900 in 2005 to £268,200 in 2025. For millions, this growth has transformed childhood stomping grounds into financially unreachable dreamlands.

The South price surge: dreams delayed

Some of the steepest climbs in property prices have occurred in London, the South East and the East of England, where returning home now often comes with a hefty price tag.

Londoners have witnessed a jaw-dropping 119% rise in average house prices since 2005, now sitting at an average of £534,400. Meanwhile, Elmbridge in Surrey takes the title for the largest average house price increase in the South East, up 110% to a wallet-wincing £712,700.

Over in the East of England, St Albans leads the charge with house prices more than doubling from £289,600 to £622,100. That’s a 110% increase, largely driven by the region’s commuter convenience and historical charm. Not quite the budget-friendly return home many may have imagined.

However, like the South East, there are more affordable pockets in the East of England.The popular coastal town Great Yarmouth has seen the lowest growth in average house price increases in the region over the last 20 years, up 77%  from £105.900 to £187,700.

North-South divide: nostalgia comes cheaper up north

But it’s not all doom and skyrocketing property ladders. Those born and raised in Northern regions may be pleasantly surprised to find affordability still within reach.

The North East has seen the smallest increase in house prices, just 39% over twenty years. In Sunderland, homes have only nudged up by 22%, from £101,600 to £124,000. In Blackpool, the rise is similarly modest, up just 26%, with homes costing £124.300, up from £98,400 in 2005, making it one of the most affordable seaside towns for returnees.

Affordability has improved in real terms in the North West and Yorkshire, too, with house price to earnings ratios falling: From 6 to 5.1 in the North West and 5.7 to 5 in Yorkshire - a rare bit of good news in the housing market saga.

A tale of two towns

To paint the picture clearly: if you’re heading home to Elmbridge, expect to fork out over £370,000 more than in 2005. But a move to Hull, where prices have risen a more modest 49%, might only cost you around £38,000 more than it would’ve twenty years ago.

The local authority with the lowest increase in house prices is Sunderland, where prices have crept up by just £22,400 over the past two decades.

Planning your next move

Daniel Copley, consumer expert at Zoopla, sums it up: "Our latest analysis brings to light the profound impact two decades of house price growth has had on the dream of 'returning home'. UK house prices have soared by 74% since 2005, making that nostalgic return financially unattainable for many, especially in hotspots in the South East and the East of England."

"However, the picture is far from uniform across the UK. Our data shows that while some areas have seen dramatic increases, house prices have risen slowly, in line with incomes in northern regions. This means that for some, the dream of returning to their roots might be much more attainable than they think.”

Key takeaways

• 52% of Brits say they would consider a move back to the area where they grew up
• But it may not be that easy - house price rises across the UK are pricing people out of their hometowns
• House prices across the UK have increased by an average of 74% over the last 20 years, from £113,900 to £268,200
• South East and Eastern England have registered a significant jump in house prices, increasing by 87% in both regions, with Elmbridge in Surrey seeing the biggest increase in house prices, up from £338,800 to £712,700
• Affordability has improved significantly in northern regions, particularly in the North East where average house prices have increased by 39%, the smallest increase across the UK over the last 20 years
• In Blackpool, average house prices have increased by just 26%, with homes costing £124.300, up from £98,400 in 2005

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by Blackstones

Everything You Need to Know About Gen H’s New Build Boost – A New Alternative to Help to Buy

June 9, 2025Newsletter

What Is New Build Boost?

New Build Boost is a home financing scheme introduced by Gen H designed to help people purchase new-build properties with a lower deposit. It combines a standard mortgage with an interest-free equity loan to lower upfront costs and improve affordability.

Key Features:

• Buy with just a 5% deposit

• Get a 15% interest-free equity loan from Gen H

• Take out an 80% LTV mortgage

• The equity loan remains interest-free for the full mortgage term

• You own 100% of the property

For the first five years, the equity loan is locked at its original value. After that, repayments adjust with the market value of the home but are capped at twice the original loan amount.

Who Can Apply?

The scheme is open to:

• First-time buyers and existing homeowners

• Buyers purchasing a new-build home from Persimmon or Charles Church

• Those with a deposit of 5–15% (from savings or a gift)

📍 Not available in Scotland or Wales

How Does It Compare to Help to Buy?

While inspired by the Help to Buy model, New Build Boost introduces several differences:

Feature	Help to Buy	New Build Boost
Buyer eligibility	First-time buyers only	Includes homeowners
Interest-free period	5 years	Entire mortgage term
Loan-to-value	75% mortgage + 20% loan + 5% deposit	80% mortgage + 15% loan + 5% deposit
Equity loan value adjustment	Based on market value from year 6	Fixed for 5 years, then adjusts (capped)
Application process	Separate mortgage and loan steps	Integrated application through Gen H

In short, New Build Boost offers greater long-term predictability and simpler access, even for those who’ve owned before.

Why It Matters

With the end of Help to Buy, many buyers were left without viable support. Gen H’s New Build Boost could provide a lifeline for those struggling with deposits or affordability—especially in today’s challenging housing market.

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Is It the Right Choice for You?

While schemes like this can open doors to homeownership, they aren’t for everyone. Monthly repayments may be higher than a standard mortgage, and if your new build is leasehold, you’ll need to budget for service charges or ground rent.

✅ Speak to a mortgage broker or financial advisor to evaluate whether this fits your budget and long-term goals.

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Next Steps

If you’re interested in buying a new-build home and are worried about saving a large deposit, consider exploring New Build Boost.

📞 Talk to a mortgage adviser
🌐 Visit Gen H’s official site for more information

Key takeaways

• Bigger Borrowing Power: Gen H is offering the potential to borrow more, with borrowers being assessed against 80% Loan to Value (LTV) criteria. For some eligible borrowers, they might be able to borrow up to 5.5 times their income. And what's better, buyers will own the entire home from day one.
• Potentially Smaller Deposits: New Build Boost unlocks 80% LTV mortgages on new-build homes with just a 5% deposit. It aims to help first-time buyers, and those looking to buy a new build, get on the ladder with less savings required.
• Thinking Outside the Box: Gen H aren't your typical mortgage lender, and this new product seems to reflect that. They're talking about how they can be more flexible and "reimagine the new build buying journey."

 

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by Blackstones

What to Expect for Mortgage Rates in 2025

May 19, 2025Newsletter

Rates are projected to hold steady between 4% and 5%, while relaxed lending criteria may improve affordability for homebuyers.

Following the recent base rate reduction—from 4.5% to 4.25% in May 2025—analysts anticipate that mortgage rates will remain relatively stable, hovering between 4% and 5% throughout the remainder of the year.

Since reaching a high in mid-2023, mortgage costs have steadily eased. Back in June 2023, the average rate for a five-year fixed mortgage at 75% loan-to-value climbed to 5.8%, significantly increasing monthly repayments for many borrowers.

Now, that same loan product has seen a notable decline, with the average rate down to approximately 5.04%, offering some relief to prospective buyers and existing homeowners alike.

Average mortgage rates in May 2025

All average rates are provided by Mojo Mortgages. The above are the average mortgage rates for various products across the market. These won't necessarily be available to you, and are not the only product types available.

Most forecasters are expecting mortgage rates to remain in the 4-5% range this year, even if inflation and the base rate edge lower.

Our Executive Director of Research, Richard Donnell, says: ‘Expectations of lower interest rates are already priced into fixed rate mortgages today.

‘Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling.

‘Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.’

Why are mortgage rates going down?

Mortgage rates began to go down in the latter half of 2023, as inflation dropped from 6.3% in September to 4.2% in December.

In June 2024, inflation hit its 2% target, but it has risen slightly since then and is currently sitting at 2.6%.

The Bank of England cut the base rate twice last year, first in August and again in November - and then again in February 2025.

At the most recent Bank of England meeting in May 2025, the Bank dropped the base rate to 4.25%. Some forecasters are predicting it will fall further by the end of the year.

The bank rate determines the interest rate the Bank of England pays to commercial banks that hold money with them. It influences the rates those banks charge people to borrow money or pay on their savings.

What factors affect interest rates?

Inflation is the main reason interest rates have been high in the UK over the last 3 years. An unexpected rise in demand - or decrease in supply - can cause inflation to rise.

At the end of 2021, the Bank of England began to raise the base rate in order to reduce inflation and help slow down price rises for everyday items including food, petrol, gas and electricity.

Inflation is currently hovering over its 2% target at 2.6%, so the Bank of England needs to keep the base rate high enough to ensure inflation doesn't rise again.

Global shocks can also have an impact on inflation, such as wars, pandemics and tariffs as they affect the flow of goods around the world.

 

Easing Affordability Tests Could Strengthen Buyer Confidence in 2025

A shift in how lenders assess mortgage applications may soon improve access to home financing. One significant change on the horizon is the easing of affordability checks, which could help boost borrowing power and reinvigorate housing market activity this year.

Although borrowers typically focus on their actual mortgage rate—currently averaging around 4.5% for a 5-year fixed term—lenders also assess whether they could afford repayments at a much higher hypothetical “stress” rate. At present, many lenders use stress rates of 8–9%, making it harder for buyers with smaller deposits to qualify.

If lenders return to pre-2022 stress levels of 6.5–7%, buyers could see their borrowing capacity increase by up to 20%. For example, a first-time buyer currently needing to show they can cover £1,550 in monthly payments at an 8.5% stress rate would only need to demonstrate affordability at £1,275 under a 6.5% rate—freeing up their budget and increasing buying options. While the exact impact varies by lender and borrower type, the effect would likely support housing demand and sales.

However, it's important to note that other mortgage regulations and criteria will continue to influence access to credit.

Housing Market Sees More Listings—and More Buyer Choice

As of early 2025, the number of homes on the market is up 12% compared to last year. With more sellers entering the market—many of whom are also planning to buy—there's greater choice for prospective buyers.

This increased inventory may limit upward pressure on prices. “We believe the wider availability of homes will help keep house price growth moderate,” explains Donnell. Buyers may find more room to negotiate, especially on properties that aren’t drawing much interest.

Affordable Regions Lead the Way in Sales Growth

Despite cost pressures from higher mortgage rates, demand remains strong in lower-priced areas. Recent data shows that regions with more accessible housing continue to outperform others.

“Sales volumes are climbing across the UK, but we’re seeing the most robust growth in places with more affordable homes,” says Donnell. Wales, the North West, and the North East are currently leading the way, each with a 10–14% annual increase in sales activity.

These trends highlight the resilience of the market and point to a potential shift in buyer behavior as affordability remains a key driver in 2025.

 

Key takeaways

• Mortgage rates are expected to hold steady around 4-5% throughout 2025
• A two-year variable rate with a 75% loan-to-value ratio currently averages 4.75% while the average five-year fixed term sits at 5.04%
• The base rate dropped to 4.25% in May 2025 in positive news for households
• Changes to affordability testing by mortgage lenders could make it easier for buyers to borrow
• The Base Rate could fall further by the end of 2025

 

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by Blackstones

Top 10 Budget-Friendly Towns Families Are Flocking To

May 19, 2025Newsletter

Explore the trending towns where affordability meets family-friendly living—these spots are gaining serious attention.

Our experts have uncovered the most popular affordable towns for families, crowning Glenrothes in East-Central Scotland number one across the whole of the UK.

In Glenrothes, in the heart of Fife and just an hour from Edinburgh, you can expect to pay an average of £136,900 for a three-bed home – that’s £540 in monthly mortgage payments.

We examined the most affordable towns and then worked out which areas were getting the most interest from property-searchers on Zoopla.

We also calculated an income-to-affordability to ratio to help you work out if one of these places would meet your budget.

Most popular affordable towns for families by region

We looked at the most popular affordable towns by region, discovering that there are affordable places for families to live even in the most expensive UK regions.

Sutton-in-Ashfield in the East Midlands takes the top spot by region, with a three-bed home expected to cost £189,400 or £750 in monthly mortgage payments.

Barking and Dagenham is the most popular affordable area in London. For a three-bed home you’ll pay £1,750 in monthly mortgage payments, based on an average value of £440,300.

Bootle is the most popular affordable town in the North West, with three-bed homes valued at half the national average at £142,900.

Plymouth offers the best affordability for families in the South West of England, with three-bed homes averaging £261,000, or £1,040 per month in mortgage payments.

Here are the best places to live in each region of the UK for families, based on the average price of a three-bed home and the popularity of homes for sale there.

 

We've also identified the top 10 towns for families to live across the whole of the UK by looking at the most affordable places along with how many people are searching for homes there.

(Source: Zoopla research 2025; *Two full-time earners/ **Estimated earnings required/***Q1 2025)

You’d need an estimated household income of £72,200 to afford a three-bed home in Glenrothes.

We discovered that it’s possible to buy a three-bed home for well under the national UK average house price of £268,000 in all but two of the towns on our list.

Four out of 10 of the most popular towns are in Scotland, including Wishaw (£168,600; £670 a month), Leven (£164,600; £650 a month) and Larkhall (£177,600; £700 a month).

Welsh towns take the second, third and fourth spots in our UK-wide list, with Llanelli (£170,600 on average; £680 monthly mortgage), followed by Neath ( £176,400; £700 a month) and Port Talbot (£160,300; £640 monthly).

Two places in the South East make an appearance - the Kent towns of Dartford and Swanley, whose relative affordability compared to other parts of the region make them popular places for families to live.

Perhaps unsurprisingly though, they are the priciest of the affordable towns on our list of family-friendly hotspots.

Families looking for a three-bed home in Dartford will need to pay an average of £1,680 in monthly mortgage payments, based on an average value of £423,600.

While anyone wanting a three-bed home in Swanley will need to pay £444,900 or £1,770 in monthly mortgage payments on average.

Affordability ‘remains critical’ for families

“This latest analysis paints a clear picture of a market where affordability remains a critical factor for families planning their next home move,” said Richard Donnell, Executive Director at Zoopla.

“What's particularly telling is the level of buyer interest these towns are attracting; three-bedroom homes in the most popular affordable locations are seeing twice the amount of listing views compared to the regional average,” he adds.

“This heightened popularity, coupled with the significant portion of would-be buyers expressing concerns about being priced out of housing, underscores the ongoing challenges facing movers and the clear appetite for value.”

How we crunched the numbers

To hit upon our top 10 of affordable places for families to live, we looked at the most affordable areas nationally and then looked at the popularity of listings of three-bed homes in those areas.

We found that property listing views were twice as high for three-bed homes in the most popular affordable towns compared to the regional average for similar properties.

In order to work out affordability, we measured the ratio of average three-bed house prices in an area to average earnings in the local area.

In each region, 30% of towns with the lowest price-to-earnings ratios were selected, resulting in a final list of 248 towns, plus 10 London boroughs (used in place of postal towns for the capital).

Popularity was ranked based on the average listing views for a three-bed home in each area.

To estimate monthly mortgage repayments for a typical three-bed house in the town, we calculated the cost of a 20% deposit, a 30 year repayment period, with a mortgage rate of 4.3%

A third of buyers fear being priced out

Meanwhile, separate research reveals that a third of buyers are worried they can’t afford to buy in their ideal family home location.

According to a survey of 2,000 UK adults conducted in April, 34 per cent of buyers fear being priced out of their preferred area.

Of those surveyed, 37 per cent said they would be happy to move to an entirely new region in the UK in order to buy a more affordable family home.

The average monthly mortgage payment for a £304,600 three-bed home is currently £1,210. Those surveyed, however, said they felt £870 was a reasonable mortgage payment.

Two in five respondents said they were unwilling to move from their ideal location.

Those willing to move said they would only be willing to move an average of 41 minutes away.

Key takeaways

• We've identified the top towns for families to live in every region of the UK
• We looked at the most affordable places to buy a three-bed home along with how many people are searching for homes there
• Sutton-in-Ashfield in the East Midlands takes the top spot by region, while Barking and Dagenham wins for London, Bootle takes the crown in the North West and Plymouth tops the list in the South West
• We crowned Glenrothes in Scotland the most popular town for families seeking affordability across the whole of the UK
• A three-bedroom home in Glenrothes is listed at £136,900 on average – around half the national average house price of £268,000
• We calculated affordability based on a regional price-to-earnings ratio so you can find out how much you need to earn to buy a three-bed home there
• Separate research shows a third of buyers are anxious about being priced out

 

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by Blackstones