If you’re planning to purchase, refinance, or upsize a high-value property in the UK this year, you’ll need to keep a close eye on where the UK economy is heading. Mid-2025 presents a mixed economic picture — with direct implications for mortgage rates, lender appetite, and high-net-worth buyers. These insights on the UK economy’s mid-2025 performance come straight from our brokers, so here’s everything you need to know.
1. Growth stalled after a strong start
The UK economy grew by 0.7% in the first quarter of 2025 which was a positive start to the year but moving into June there was a contraction of 0.1% which is attributed to tax increases, a higher minimum wage and the US Trade war.
What this means for mortgage clients:
While GDP growth is still forecasted at 1.3% for 2025, lenders are becoming more cautious — especially when it comes to large or complex loans. For professionals with irregular income (such as barristers or self-employed consultants), this environment may call for bespoke mortgage structuring to secure optimal terms.
2. Inflation remains ‘sticky’ at elevated levels
Inflation remains sticky, it was announced last week that the consumer price index hit 3.6% which was the highest since January 2024. The key drivers behind this were rising fuel prices and wage increases driving service inflation at 4.7%.
Last week’s announcement on inflation will put a dampener on a possible base rate cut which was expected in August with some monetary policy committee members becoming increasingly cautious about easing rates while inflation remains persistently high.
Why this matters to you:
If you’re considering refinancing a large mortgage, or are holding off on a property purchase in hopes of rate drops — be prepared for a longer wait as rates may not drop as quickly as anticipated. Acting now could be wise if you’re worried about continued rate volatility.
3. Labour market shows strain
The Labour market is showing signs of weakness, with unemployment rising to 4.7% which is the highest since mid-2021 and a key indicator of the UK economic sentiment. The number of people on company payrolls has also fallen, down by 178,000 over the past year. This decline follows a number of tax changes including higher employers’ National Insurance contributions and increased pressure on businesses.
What to consider:
While this might signal slower growth ahead, it could also prompt eventual policy loosening by the Bank of England — good news for buyers with large deposits or high equity looking to leverage favourable mortgage terms when the market shifts.
The UK is in a delicate position — balancing inflation control with the risk of economic slowdown. For mortgage clients in the £1M+ bracket, timing and strategy are more important than ever.
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