New mortgage rules could slash deposits for first-time buyers but add £19k to average house prices

3 June 2025, 07:11

New mortgage rules could see average house prices rise by £19,000 and help first-time buyers with lower deposits, according to UK estate agents Savills.

Adjustments to stress testing practices could see property prices spike by between 5% and 7.5% over the next five years, Savills has said.

The estate agent also predicts that the average cost of a deposit required by a first-time buyer could drop from £58,000 to £45,000 over the same period.

Lucian Cook, a researcher at Savills, said: “Change would not be immediate, with the impact on house prices and transactions likely to take place over a period of five years.

“But in the medium to long term, the market would feel the knock-on effect of a widening pool of buyers.

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"However, the agency stressed that transactions and house prices are "strongly linked" - the more relaxed mortgage rules push up house prices, the less impact there will be on transactions."

Lenders perform stress tests to see if borrowers could cope with surging interest rates or lower income.

They have been allowed to adjust their stress testing based on market expectations.

Those who have tweaked their stress tests recently include Halifax, Santander and Barclays.

While this has allowed some buyers to borrow more - it could lead to a surge in demand that may hike up house prices.

House prices surged by 0.5% in May, reversing a decline seen the previous month, the Nationwide Building Society has said.

The month-on-month climb brought the average UK house price to £273,427 following a 0.6% decrease in April.

House sales dropped sharply in April after the stamp duty deadline put the brakes on buyer activity following a March rush.

There were 64,680 house sales in April - 64% lower than the 177,440 reported in March, according to estimates from HMRC.

It was also 28% lower than the 89,860 sales reported in April 2024.

HMRC said the latest figures have been affected by changes to stamp duty rates - a tax on property which applies in England and Northern Ireland.

From April 1, first-time buyers started paying stamp duty on properties costing more than £300,000. They were previously exempt from paying the tax on properties up to £425,000.s

Last month, the Bank of England cut UK interest rates for the second time this year, lowering rates to 4.25%.

Rates had previously been held at 4.5%, with the lowering coming as welcome news to homeowners.

The bank has cited Donald Trump's trade war as one of the key reasons for the lowering of borrowing rates, with the UK's economic growth expected to be stronger than previously thought this year, but weaker over 2026 following the impact of tariffs.