Will mortgage rates go down in 2025?

Author - John Fraser-Tucker Editor - Helen Lovell

Last reviewed on 6 February 2025

In this article:

• When will mortgage rates go down?

• Why are mortgage rates so high?

• Will the base rate fall in 2025?

• Should I wait for rates to fall before getting a mortgage?

• How to get the best mortgage deal

When will mortgage rates go down? 

It's expected that mortgage rates will start to gradually fall in-line with any Bank of England base rate drops. That's because, while lenders consider many factors when setting their interest rates, rates for all kinds of mortgages are impacted by the base rate.

The base rate recently fell to 4.75% from 5% on 7th November 2024 and remained steady for the rest of the year, falling again to 4.5% in February 2025.

However, in 2024 the potential for lower mortgage rates was affected by several major events that impacted economic outlook both in the UK and abroad: a new Labour government took the helm, they announced their first Autumn budget and the US Presidential Election took place. As a result, it's likely mortgage rates will fall at a more modest rate.

Those on tracker deals should see the impact on their mortgage rate almost immediately if the base rate changes. That's because most residential tracker mortgage rates are set at a certain percentage above the BoE base rate, so the rate will rise and fall in response. Homeowners with a tracker mortgage will be hopeful for at least one or two base rate drops throughout 2025, as this will result in lower mortgage repayments.

The impact on fixed-rate mortgages is a little trickier to predict because they tend to be priced based on swap rates, although these are influenced by the base rate. Two-year swap rates were at 4.2% on 7th November and by 18th December (the following Monetary Policy Committee meeting) it had slowly crept up to 4.3%. If swap rates continue to increase, we could well see lenders nudge up the price of fixed-rate mortgages in the short-term.

Despite mortgage rates falling towards the end of 2024 and into early 2025, it’s still difficult to know what will happen to mortgage rates throughout the rest of this year.

The below table shows the average fixed mortgage rate for two-year and five-year fixed-rate mortgage deals for every month over the past year. These are based on our data of deals available from five of the biggest UK lenders Santander, Nationwide, Natwest, Halifax and HSBC).

You can see from the data above that fixed mortgage rates were very volatile throughout 2024, despite the base rate remaining at 5.25% between August 2023 and July 2024.

In 2024, the lowest average rate for a two-year fixed mortgage was 4.6%, while the highest was 5.2%. For a £200,000 mortgage with a 25-year term, the predicted monthly mortgage payment would be £1,123 at a 4.6% rate, or £1,193 at a 5.2% rate. Even a seemingly small rate increase would still increase your monthly repayments by £70, highlighting the importance of timing and thorough research when securing a mortgage.

The five-year fixed mortgage market also experienced changes in 2024, with average rates varying between 4.2% and 4.7%. Using the same mortgage example, this translates to a monthly payment range of £1,078 at the lower rate and £1,134 at the higher rate – a difference of £56 per month or £672 annually.

If you're wondering whether you should get a two-year or five-year fixed-rate mortgage, you may wish to speak to a mortgage advisor. They'll offer recommendations on the types of mortgages that could best suit you and your circumstances while also helping you to secure a competitive rate.

How do mortgage rates work?

Mortgage rates determine how much interest you'll pay. The rate you're offered is set by your lender, and will be based on several factors including economic conditions, the Bank of England base rate, your own personal and financial circumstances, your loan-to-value ratio and the type of mortgage you choose.

Put simply, the higher the interest rate, the higher your monthly mortgage payments will be and the more expensive your mortgage will be in total. Lower rates will reduce your costs, both monthly and in total.

With fixed-rate mortgages, the interest rate stays the same for the full length of the deal which means your monthly payment will remain consistent. This can provide reassurance if rates rise, as you won't be impacted by increased rates unless your fixed-rate deal comes to an end. However, if rates fall, you won't be able to take advantage.

For those on variable-rate mortgages, including discount mortgages and tracker mortgages, the interest rate can change at any time so your monthly repayments will be largely at the mercy of Bank of England base rate changes.

Why are mortgage rates so high?

Towards the end of 2021, the Bank of England began to increase the base rate of interest. This was in order to combat rising inflation. It went from 0.1% to 5.25% in less than two years. Although it has recently fallen to 4.75%, mortgage holders are still feeling the impact of a relatively high base rate.

The base rate is the Bank of England’s main lever to combat rising inflation, which they aim to keep at the government’s target of 2%. The idea is that by increasing interest rates, people will tend to save more and spend less, helping to keep inflation down.

Mortgage rates are often heavily influenced by the base rate. So, as the base rate increased, so did mortgage rates. This was particularly true for those on variable mortgages, as the rates are often directly influenced by the base rate.

Fixed-rate mortgages have a set rate for a specified amount of time so those already on one weren’t affected by the increase in the base rate of interest straight away. But, when homeowners' fixed-rate deals came to an end, many found that the new fixed-rate mortgage deals available had higher rates.

Will the base rate fall again in 2025? 

Though the base rate has fallen to 4.5%, interest rates are still significantly above the rate of inflation (currently at 2.5%) so further cuts throughout 2025 are likely. It's important the Bank of England doesn't cut rates too much or too quickly, though, to make sure that inflation remains stable. So it's predicted we'll see at least a few cuts this year, with some suggesting the Bank of England's Monetary Policy Committee could announce as many as four drops.

Even if the base rate does fall, while those on tracker rates will likely benefit from a fall in repayments, the impact on other variable deals and fixed-rate mortgages in the market is less certain.

Should I wait for rates to fall before getting a mortgage?

Whether now is the right time for you to get a new mortgage, either for a new property or an existing one, depends on your personal and financial circumstances. 

If you are due to remortgage soon, the average standard variable rate is still above 8% which is higher than most of the other fixed or variable deals on the market. So, waiting for rates to fall could end up costing you a lot in the short term. 

And for those looking to buy, only you can decide whether it’s the right time to move or get on the property ladder. But if you do see a property you like, remember that it may not still be available when or if mortgage rates do fall.

How to get the best mortgage deal

Whether you’re buying or remortgaging, here are some tips on getting the best mortgage deal:

1. If you can afford to, consider putting down a larger deposit to access a lower loan-to-value (LTV) mortgage - lower LTV deals usually mean better rates, with 40% deposits generally unlocking the best deals

2. Consider the total cost of a mortgage deal – it’s tempting to just look at the rate when comparing mortgages, but it’s important to look at the other fees involved as well as these can sometimes make a deal more expensive overall than one with a higher rate

3. Speak to a mortgage broker who can offer expert advice and look at options from across the market to find your best deal