Table of Content
As we look ahead to 2025, many homeowners and prospective buyers are asking the same question: will mortgage rates go down? After a period of significant rate increases, the possibility of lower rates is a welcome thought. But what are the factors that influence mortgage rates, and should we expect them to decrease in 2025?
At the time of writing, the Bank of England base rate stands at 4.75%, down slightly from 5.25%. While this reduction might seem modest, it signals that the Bank is taking steps to control inflation. But what does this mean for mortgage rates in 2025? Let’s break it down and see what factors are at play.
What Influences Mortgage Rates?
Mortgage rates are shaped by a combination of factors, some of which are directly tied to the Bank of England base rate, while others are influenced by wider market conditions.
1 The Bank of England Base Rate
The base rate is set by the Bank of England and is one of the most influential factors that lenders use to determine interest rates. When the Bank raises or lowers its base rate, mortgage rates typically follow suit. So if the Bank of England reduces rates to help control inflation, mortgage rates might drop as well.
2 Swap Rates
While the base rate is a key indicator, fixed mortgage rates aren’t solely determined by it. Swap rates, which are the rates banks pay to borrow money in the financial markets, also play a significant role. If swap rates decrease, fixed mortgage rates might follow suit. This means fixed-rate mortgages are influenced by a wider range of factors, including investor sentiment and economic forecasts, rather than just changes in the Bank of England’s base rate.
Looking for 5 star mortgage advise? We’re ready to help.
Whatever stage you’re at, it’s never too early to reach out.
View all 53 reviews on Trustpilot
5 star based on 203 Google reviews
3 Inflation and Economic Conditions
Inflation has been a key driver of rate hikes over the past few years. As inflation rises, the Bank of England raises rates to cool down the economy. However, if inflation slows or stabilizes, the Bank could decide to reduce rates to encourage borrowing and spending, potentially leading to lower mortgage rates.
4 Global Economic Factors
Economic instability, geopolitical events, and changes in the global economy can also affect UK mortgage rates. If global conditions improve and investor confidence rises, it might reduce the cost of borrowing, leading to lower mortgage rates.
What Can We Expect for 2025?
Predicting mortgage rates with absolute certainty is nearly impossible, but there are a few signs that suggest mortgage rates may decrease in 2025. If inflation continues to ease and the economy stabilizes, we could see rates start to fall. However, as we’ve learned in recent years, the market can be unpredictable, and other global factors could have a significant impact.
If rates do drop, it’s likely to be gradual. While mortgage lenders might adjust their rates to reflect changes in the base rate, the broader economic picture will influence their decisions.
Speak to a mortgage advisor today for the best deal.
Should You Fix Your Mortgage, and for How Long?
With so much uncertainty around mortgage rates, many homeowners and buyers wonder whether they should lock in a fixed-rate mortgage. Here are some things to consider:
1 Fixed Rates Are Not Solely Linked to the Bank of England Base Rate
Fixed-rate mortgages are influenced by factors beyond just the base rate, like swap rates. So, even if the Bank of England lowers its rate, it doesn’t always mean that fixed rates will follow immediately. If you’re thinking about fixing your rate, you’ll want to consider not just the current rate, but also where rates might be headed in the next few years.
2 Tracker Rates React Immediately to the Base Rate
Tracker mortgages, on the other hand, are directly tied to the Bank of England base rate. This means if the base rate goes up, your mortgage payments will likely increase, and if it goes down, your payments will decrease. Tracker mortgages offer flexibility, but they also come with more risk as rates can fluctuate regularly.
Outstanding service and clear communication are at the core of what we do. But don’t just take our word for it—read firsthand experiences from our clients and discover why they rate us a 5-star mortgage broker.
3 How Long Should You Fix For?
Here’s where it’s important to take a step back and consider your personal situation. Mortgage decisions aren’t all about hedging bets on what rates will do in the future—they should also take into account your plans and financial goals.
For example, if you plan on selling your home in a couple of years or paying off the mortgage early, locking into a 5-year fixed deal might not make sense. On the other hand, if you’re looking for stability and aren’t planning on moving anytime soon, a longer fix could provide peace of mind.
The length of your mortgage fix really depends on your circumstances. If you’re unsure, a shorter-term fix might allow you to reassess in a few years. It’s all situational.
What Should You Do Now?
While no one can predict with certainty whether mortgage rates will go down in 2025, there are steps you can take now to protect yourself from potential rate hikes or secure a favourable deal if rates do decrease:
- Consider locking in a rate now to protect yourself from potential increases in the future.
- Look at your current mortgage deal—if you’re on a variable or tracker rate, it’s important to stay on top of rate changes.
- Save for a larger deposit if you’re looking to remortgage or buy. This can help secure a better rate and give you more options.
- Work with a mortgage broker to ensure you’re getting the best deal for your unique circumstances.
At Strive, we’re here to help guide you through the changing mortgage landscape and find the right solution for you. Whether you’re looking for stability or flexibility, we’ll work with you to make sure you get the best deal for your future.
In summary, while the future of mortgage rates remains uncertain, there are opportunities to take control of your mortgage strategy. By staying informed, planning ahead, and working with experts, you can secure the best deal no matter what direction rates take in 2025.
Strive Mortgages saves you time, hassle & money
Jamie Elvin
Jamie is an expert in all things mortgages, and our most experienced broker. Connect with Jamie and get started to see how Strive Mortgages can help you.
