How will the Spring Statement 2025 impact my mortgage? 

What to expect from the Spring Statement 2025

The Autumn Budget announcement was packed full of major fiscal changes but, fortunately, analysts don’t think we should expect too many surprises in the upcoming Spring Statement. The Chancellor has committed to holding only one major fiscal event per year, so is unlikely to provide significant fiscal updates (including any major tax changes) until Autumn 2025. 

The Chancellor may well be waiting to review the Office for Budget Responsibility’s Economic and Fiscal Forecast, which will be published at the Spring Statement, before making definitive decisions on tax changes or spending cuts though.  

British economy: the state of play

The Chancellor is likely to provide a summary of the UK’s economic outlook. Back in October, the Office for Budget Responsibility predicted the economy would grow by 2% in 2025, though these figures look overly optimistic now given the UK economy grew by just 0.1% in the last quarter of 2024. The Bank of England has also recently halved its UK economic growth forecast from 1.5% to 0.75%. 

According to the Office for National Statistics (ONS), the UK earned £15.4 billion more than it borrowed in January 2025, though this surplus was still dramatically lower than predicted, with the Office for Budget Responsibility forecasting £20.5 billion. 

How could the UK’s economic performance impact mortgage rates?

Though the Bank of England base rate fell to 4.5% in February 2025, the inflation rate has not lowered significantly. It has, in fact, crept up since September 2024 and now stands at 3% - a percentage point higher than the 2% target and slightly higher than predicted by the Office for Budget Responsibility. 

This provides plenty of uncertainty for homeowners and those thinking about buying a property in 2025. Will mortgage rates fall soon - or could they start to increase if the Bank of England decides to hold or even increase the base rate slightly in an effort to curb rising inflation? There are no guarantees, but experts aren’t predicting sudden, significant changes in either base rate or mortgage rates. 

The average two-year fixed mortgage rate (75% LTV) currently stands at 4.6%, seeing only variations of 0.1% since September 2024. This is still better news for borrowers compared to a year ago when the average two-year fixed mortgage rate (75% LTV) stood at 5%. 

Upcoming legislative changes, Spring Statement industry predictions and the potential impact on mortgage borrowers

Stamp Duty

As announced in the Autumn Budget 2024, we’re about to see a Stamp Duty shake up. 

From 1st April 2025, significant changes to Stamp Duty Land Tax will take effect: 

For first-time buyers

• The 0% threshold will decrease from £425,000 to £300,000

• Properties priced over £300,000 will be taxed at 5% on the portion between £300,001 and £500,000

• Properties over £500,000 won’t be eligible for any first-time home buyer relief

For home movers

• The 0% threshold for main residences will fall from £250,000 to £125,000.

• A new 2% rate will apply on properties priced between £125,001 and £250,000, while the 5% rate will kick in for values between £250,001 and £925,000.

• The rate will increase to 10% for those purchasing a property between £925,001 and £1.5 million

• Any properties worth more than this will receive a 12% Stamp Duty charge on any portion over £1.5 million

For additional properties

• The first £125,000 of the property value will incur a 5% charge

• Properties valued between £125,001 and £250,000 will be taxed at 7%

• Higher rates apply above the £250,000 threshold

Analysts are not expecting to see any revisions or reversals to the legislative changes already announced. However, these changes could have a significant impact on those looking to buy a new property or move home as - put simply - buying is going to become more expensive. 

In addition to saving for a deposit and all the other expenses associated with a house move, buyers must now take into account the potential increase in Stamp Duty Land Tax too. 

Employer National Insurance Contributions

As announced in October, Employer National Insurance Contributions (NICs) will rise to 15% from 6th April 2025 with the NIC threshold dropping to £5,000. These NIC changes are expected to raise between £23.8 billion and £25.7 billion a year. 

This, of course, will have a major impact on employers who will now be facing much higher employment costs. We’re unlikely to know for sure just how much this will impact job losses, wage stagnation and consumer price increases until the changes kick in in April. 

Given such major tax hikes were introduced in Autumn, further changes for businesses are unlikely to be announced. We might see slight adjustments to the changes due to come into effect in April (many are hopeful for a higher threshold before Employer NICs become payable or NIC relief for the charity sector), though this is thought to be unlikely. 

Tax rises

As mentioned above, while tax hikes are not currently expected in the Spring Statement 2025, this is not guaranteed. A Financial Times survey of 96 leading economists found that tax increases are expected before the next general election in 2029. 

However, one thing to be aware of is fiscal drag. The tax thresholds will remain frozen, so they won’t rise in line with inflation. This means more people pay tax or move into higher tax brackets as their income rises. This will, of course, impact borrowers as they may need to take into account a higher tax bill when working out their affordability. 

Using a mortgage calculator may be able to give you a rough idea of how much you can borrow, based on your gross (before tax) income and deposit size. However, if you’re soon to be dragged into a higher tax bracket, you’ll need to think about how this might impact your overall affordability and day-to-day disposable income. 

Changes to ISAs

Rumours are already starting to swirl that the Chancellor may announce changes to individual savings accounts (ISAs). What this looks like and who is likely to be affected is yet to be confirmed, but it’s thought the Chancellor may wish to encourage investing by encouraging Brits to select stocks and shares ISAs. 

Currently, individuals can deposit up to £20,000 into an ISA, and any gains generated are tax-free. There’s talk in the industry that the maximum amount you can pay into a cash ISA may be cut from £20,000 down to as low as £4,000. Lenders are already weighing in on this, with Tom Riley, director of retail products at Nationwide, stating that limiting cash ISAs could have a knock-on impact on first-time buyers as financial organisations use the deposits to fund key mortgage products.  

What about Lifetime ISAs?

The spotlight is also on Lifetime ISAs - a real benefit for first-time home buyers looking to supercharge their savings. First-time buyers face a withdrawal penalty if they use a Lifetime ISA to purchase a property that exceeds £450,000 though, with house prices booming, many suggest this price cap is far too high. Will Rachel Reeves announce a reduction in the withdrawal penalty or property price threshold? Only time will tell, but it would be a cause for celebration for first-time buyers looking to step onto the property ladder in pricier regions.

Inheritance tax changes

Inheritance Tax is currently charged at 40% on any portion of an estate worth over £325,000. Individuals are, however, exempt from paying tax on any gifts, provided that the giver survives for seven years after the gift is given. You’re also able to give a total of £3,000 worth of gifts free of Inheritance Tax. 

There were some changes to Inheritance Tax in the Autumn 2025 budget, focusing on business property relief and agricultural property relief. However, there are some suggestions that broader changes to Inheritance Tax may be on the horizon in the future. 

For example, the Chancellor could eventually decide to limit how much a person can gift tax-free, regardless of how long they live afterwards. For potential housebuyers relying on gifted deposits from family, having to pay tax on significant sums of money could have a big impact on their ultimate deposit size and affordability.

The Inheritance Tax allowance is frozen until 2030 but, if the Government decides to extend the freeze further, even more people may end up paying tax on inherited estates and assets as property values naturally rise above the £325,000 cap. This could be a knock to families hoping to use inheritance to help them reach their homeownership goals.

2025 - the year of mortgage renewals? 

Experts are predicting a significant rise in mortgages up for renewal this year. It may now perhaps be more favourable for some borrowers to switch providers when their two and five-year fixed-rate deals come to an end which could trigger a rise in remortgages versus customers choosing to stick with their current lender. 

• Many customers locked in their rate on a slightly longer fixed deal to secure favourable rates back in 2020, when the average interest rate for five-year fixed-rate mortgages was 1.66% (March 2020). While customers coming to the end of their fixed-rate deal will likely still face much higher monthly repayments, rates have slowly started to come down compared to a couple of years ago.  

• Interest rates were generally much higher in 2023 (4.74% for a two-year fixed-rate mortgage on average in March 2023) resulting in many homeowners locking in a shorter-term fixed deal in the hope that rates might fall. These two-year fixed-rate customers will now be looking for a new deal, and may even be able to secure one at a lower interest rate. 

We can’t say for certain how mortgage rates will change throughout the year, though any significant changes announced in the Spring Budget 2025 may have a knock-on economic impact. Fortunately, most analysts are not predicting Rachel Reeves to announce any major changes! 

If you’re still feeling uncertain about the current market rates and how changing interest rates could impact your monthly repayments, you may find it helpful to speak to a mortgage broker. They can help you work out whether fixing now could be a good option for you.