If youโre buying your home, you probably keep a close watch on mortgage rates.
In the wake of Covid there were mortgage deals at around 2% or less. Borrowing cost less than saving, thanks to the effects of double-digit inflation.
It couldnโt last. That same inflation meant the Bank of England was forced to up the base rate, the rate at which it lends to other banks from the historic low of 0.5%. Mortgages went up with it. Suddenly even the most competitive mortgages cost 5% or more. This was bad enough if you were shopping around for a new home. If you were coming to the end of a fixed rate deal arranged when mortgages were at their lowest, you might be looking at remortgaging to double or triple your monthly payments and making your home unaffordable.
But what is happening to mortgage rates now โ and what is going to happen next?
Mortgage rates have fallen
Mortgage rates have tumbled. The Bank of England has cut the base rate from 4.5% to 4.25%., and with it the cost of mortgage deals has fallen.
According to Moneyfacts, the average two-year fixed mortgage deal has dropped from 5.91% a year ago to 5.18% in May 2025. Five-year deals have fallen from 5.48% to 5.10% over the same period.
Introductory deals are even better, with dozens of mortgage deals now below 4%. But what happens next?
The mortgage forecast
There could be more cuts to come. The International Monetary Fund (IMF) expects the Bank of England to reduce interest rates two more times this year.
This is despite the UK still grappling with inflation, which higher rates are designed to combat. It is rooted in concerns about the international economic outlook, with wars and Trump tariffs. Worries about a downturn in trade abroad makes it prudent to stimulate growth at home โ which a cut in rate should achieve.
Cuts in interest rates from 4.50% to 4% or even 3.75% before the end of this year have been predicted.
Cuts โ or even the expectation of cuts โ are usually favourable for mortgage rates. But getting the most competitive rate for your loan might not mean holding off from a purchase. The mortgage market has become fiercely competitive, and lenders may be pricing loans now based on further reductions to come.
But no-one knows whatโs around the corner. national and global events can upset even the most confident predictions. There is no guarantee that rates will fall.
Whatโs more, the mortgage rate is just one aspect of a deal. Borrowers need to watch out for extra costs as some deals have high fees attached.
Should you fix your mortgage?
Those who locked in rates at 1-2% several years ago are now facing remortgage offers of around 4-5%. Falling rates come as a huge relief. But do you risk missing out on even lower rates by taking out a new fix now?
Even if you have months before your fixed rate finishes, securing an offer now could mean protection against potential future increases, and if rates fall further before your current fix ends, you are not tied in. You can get another offer at the lower rate.
You could also consider a shorter 18 months to two-year fixed deal, letting you reassess your options if rates decline further.
What should you do now?
Whatever your current position, knowing what is available in the mortgage market, and being prepared is essential. Being on a variable rate might not seem a bad idea if rates are falling โ but you could miss out on the most competitive deals, and run the danger of finding yourself on your lenderโs standard variable rate (or SVR) which could be 7.5% or more.
A great way to get the most suitable mortgage deal? Call us at Continuum for independent advice that covers the market. We can provide the expertise you need.
Will mortgage rates fall in 2025? | MoneyWeek
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a particular mortgage product and you should seek independent financial advice before embarking on any course of action.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
