Mortgage Rate Predictions 2025 UK: What to Expect and How to Prepare

As we move into 2025, mortgage borrowers and homeowners across the UK are keenly watching interest rate trends. With inflation cooling, real wages rising, and the Bank of England expected to make further cuts to the base rate, how will mortgage rates respond?

This article provides a comprehensive, data-driven forecast for UK mortgage rates in 2025, exploring expert predictions, key economic factors, and actionable steps for homeowners, buyers, and investors.

Will Mortgage Rates Go Down in 2025?

The Bank of England’s base rate, which peaked at 5.25% in 2023, saw two cuts in 2024, bringing it down to 4.75% by the end of the year. Forecasters anticipate between two and four additional cuts in 2025, potentially bringing the base rate down to between 3.75% and 4.25% by year-end.

However, fixed-rate mortgage products have been fluctuating, with some lenders raising rates in early 2025 despite falling inflation. Financial markets are pricing in only one or two rate cuts, meaning borrowers shouldn’t expect a dramatic drop in mortgage costs this year.

How Will Different Mortgage Types Be Affected?

1. Fixed-Rate Mortgages

• Fixed-rate mortgages remain the most popular choice among UK borrowers.

  
  

• Two-year and five-year fixed deals have seen some slight reductions, but lenders are cautious due to economic uncertainty.

  
  

• In January 2025, Halifax, HSBC, and Leeds Building Society cut rates on select fixed products by up to 0.35%.

  
  

• However, lenders like Virgin Money have increased rates on certain fixed-term deals.

Expert Tip: If you're considering a fixed-rate mortgage, it may be wise to lock in a deal soon while rates are still relatively stable.

2. Tracker Mortgages

• Tracker mortgages directly follow the Bank of England base rate.

  
  

• If the base rate drops in 2025, tracker mortgage borrowers will see lower monthly payments.

  
  

• These products remain a risky option since rate cuts are uncertain.

  
  

3. Standard Variable Rate (SVR) Mortgages

• The average SVR in January 2025 remains high at 7.99%, making it one of the most expensive mortgage options.

  
  

• If you're currently on an SVR, remortgaging to a new deal could save you thousands per year.

  
  

Key Factors Influencing Mortgage Rates in 2025

Several economic and global factors will determine whether mortgage rates rise or fall this year:

1. Inflation Trends

• Inflation fell slightly from 2.6% to 2.5% in January 2025, but remains above the Bank of England's 2% target.

  
  

• If inflation stays stubbornly high, rate cuts may be delayed or reduced, keeping mortgage rates elevated.

  
  

2. Bank of England Interest Rate Policy

• The next Bank of England rate decision is on 6 February 2025.

  
  

• Financial markets are currently expecting one or two rate cuts this year, but nothing drastic.

  
  

3. Housing Market Trends

• House price growth has slowed but remains positive, with mortgage affordability improving slightly.

  
  

• Affordability remains a key issue, particularly for first-time buyers and remortgagers.

  
  

4. Global Economic Factors

• The Ukraine war and geopolitical instability continue to affect energy prices and inflation.

  
  

• US trade policies under a potential Trump presidency could influence global financial markets and UK mortgage rates.

  
  

What This Means for Homeowners and Buyers

For First-Time Buyers

• House prices remain high, but mortgage affordability is slowly improving.

  
  

• Consider 5-year fixed deals, which currently offer some of the lowest rates available.

  
  

• If rates fall further, you may have the option to remortgage to a lower deal in a few years.

  
  

For Remortgagers

• If your fixed deal is ending in 2025, start shopping 6 months in advance to secure a new rate.

  
  

• Avoid rolling onto your lender’s expensive SVR, which is currently around 8%.

  
  

• Use mortgage comparison tools or brokers to find the best possible deal.

  
  

For Buy-to-Let Investors

• Buy-to-let mortgage rates remain high, and the sector faces new challenges, including a 2% Stamp Duty surcharge from 2025.

  
  

• Higher rates and new tax changes may make rental yield calculations tighter, requiring careful planning.

  
  

Current Mortgage Rate Averages (January 2025)

Mortgage Type	Average Interest Rate (60% LTV)
2-Year Fixed	4.33%
5-Year Fixed	4.22%
Standard Variable Rate (SVR)	7.99%

(Source: Rightmove, January 2025)

How to Secure the Best Mortgage Deal in 2025

✔ Act Early: Start searching for a new mortgage deal up to 6 months before your current deal ends.

✔ Compare Rates: Use mortgage comparison sites and brokers to find the best rates available.

✔ Consider Locking In: If you’re unsure whether rates will rise or fall, locking in a fixed-rate deal could provide stability.

✔ Keep Your Rate Under Review: If you secure a deal but find a better one before completion, some lenders allow you to switch.

For a detailed guide on property investment and mortgage strategies, check out Nest Homes’ Investment Guide.

Final Verdict: Is 2025 a Good Time to Get a Mortgage?

Yes, but with caution. While mortgage rates are expected to trend lower, they won’t fall dramatically. If you’re buying a home or remortgaging, acting early and securing a competitive deal is crucial.

For expert guidance and the latest mortgage offers, visit Nest Homes’ Mortgage Advice Section.

Stay Informed: Bookmark this page for mortgage rate updates or sign up for a mortgage alerts service to track rate changes throughout 2025.