UK Mortgage Rates 2025: What Economists Predict & How Homeowners Should Prepare
Friday 4 July, 2025
As the UK navigates a complex economic landscape, homeowners and prospective buyers are keenly watching mortgage rate forecasts for the rest of 2025 and beyond. Market analysts and economists anticipate a gradual decline in mortgage rates throughout 2025, influenced by several key factors.
Understanding these projections and their implications is important, especially for those with mortgages nearing the end of their fixed terms.
Economic Factors Influencing Mortgage Rates
The Bank of England's base rate significantly impacts mortgage rates. In recent times, the base rate has been elevated to combat persistent inflation. However, economists predicted a series of rate cuts in 2025, with expectations of the base rate decreasing by approximately 0.75 percentage points over the year, potentially bringing it down to around 4%. This anticipated reduction is influenced by factors such as subdued economic growth and evolving fiscal policies.
Additionally, global economic developments, including recent U.S. tariffs on UK exports, are expected to impact the UK's economic performance. These tariffs may disrupt supply chains and dampen demand, potentially influencing the Bank of England's monetary policy decisions.
Implications for the Mortgage Market
A reduction in the base rate typically leads to lower mortgage rates, which can benefit borrowers through reduced monthly repayments and increased affordability. However, the mortgage market remains sensitive to various factors, including lender policies and broader economic conditions.
While lower rates may stimulate housing demand, recent data indicates a cooling housing market, with house prices experiencing declines following the end of temporary tax breaks.
It's also important to note that the transmission of interest rate changes to mortgage rates can vary. The International Monetary Fund has highlighted that in countries like the UK, where fixed-rate mortgages are prevalent, the impact of rate changes may be delayed as borrowers are insulated until their fixed terms conclude.
Guidance for Borrowers with Maturing Fixed-Rate Mortgages
For homeowners with fixed-rate mortgages approaching the end of their terms, strategic planning is essential. Here are some recommendations based on the time remaining on your current mortgage deal:
Mortgage Term Ending in One Month
- Immediate Action Required: Contact your lender promptly to explore available options. Failing to secure a new deal may result in transitioning to a standard variable rate, which could be higher than current fixed rates.
- Consult a Mortgage Broker: Engaging with a mortgage broker at Thomas Oliver can provide access to a broader range of products and potentially more favourable rates. Brokers can offer personalised advice based on your financial situation.
Mortgage Term Ending in Six Months
- Advance Planning: Many lenders allow borrowers to lock in a new rate up to six months before the current deal expires. This strategy can safeguard against potential rate increases.
- Monitor Market Trends: Stay informed about economic indicators and mortgage rate forecasts to make informed decisions as your renewal date approaches.
Mortgage Term Ending in One Year
- Long-Term Strategy: While it's slightly early to secure a new rate, begin researching and understanding the market. Establishing a relationship with a Thomas Oliver now can facilitate a smoother process when the time comes.
- Financial Health Check: Use this period to assess your financial situation, improve credit scores if necessary, and ensure you're in the best position to secure favourable terms in the future.
Katherine Mumford, Mortgage Broker & Protection Adviser in Tottenham, North London said:
“The outlook for UK mortgage rates in the second half of 2025 suggests a potential easing, influenced by anticipated base rate cuts and broader economic factors. For borrowers with fixed-rate mortgages nearing maturity, proactive engagement with lenders and mortgage brokers is crucial to navigate the evolving landscape effectively. By staying informed and planning ahead, homeowners can position themselves to take advantage of favourable rates and ensure financial stability”.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Sources: Reuters, This is Money, Latest news & breaking headlines, Forbes +1The Guardian+1, BBC+1Forbes+1Forbes, The Guardian+3Financial Times+3Reuters+3
Approved by The Openwork Partnership on 24/06/2025.
