A shrinking economy and the continuing effects of an interest rate squeeze could make 2025 a “tricky year for consumers and businesses alike”, the chief executive of Family Building Society has warned.

According to the society’s Mark Bogard, the slowing of the economy could accelerate further as the New Year gets underway with the full effects of October’s Budget yet to be felt.

Bogard also highlighted the many homeowners due to come to the end of their five-year fixed mortgages in 2025 as a further concern.

“The real squeeze of increased interest rates on consumers has happened much slower than in previous cycles because so many people have five-year fixed mortgages,” he said. “But it is certainly happening now for many, with more to come in 2025.

“After the Bank of England held rates at 4.75% on 19 December, the market is now expecting rates to go down only twice by 0.25% in 2025 to 4.25%. However, they could go lower, just look at what's happening in the Eurozone where both France and Germany are hurting and rates are falling.

“This would of course be bad news for savers, who’ve had the first period since 1948 when savings rates have been higher than inflation – so they've had a real return on their money.”

Bogard also commented that despite Labour’s plans to target housing as a “big economic growth driver”, Angela Rayner’s planning proposals would not solve the housing crisis as the annual new build target represents just 1% of the existing housing stock.

“She needs to concentrate on the other 99% and also focus more on brownfield development rather than greenfield which will be easier to get done and generate less objections,” Bogard added. “If I were her, I’d ban greenfield development for 10 years.

“Giving downsizers a stamp duty holiday would also help get older people out of under occupied family homes thus effectively increasing housing supply.”

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