Will mortgage rates go down in 2025 UK?

The Bank of England last lowered the base rate from 4.25% to 4.00% on 7 August 2025, the first cut in quite some time and the lowest level for more than two years. When the committee met again on 6 November 2025, they decided to hold it at 4.00%. No surprises there. It showed they’re still cautious, watching how stubborn price pressures play out against slower growth.

Back in 2024, inflation had finally started easing. It fell from around 4.4% in March to roughly 3.9% by early summer. It didn’t quite reach the Bank’s 2 % target, but by October it was down to about 1.7%, the lowest point we’d seen in years.

That drop came after a long stretch of high prices. Inflation had peaked at 11.1% in October 2022 and stayed high through much of 2023. The Bank reacted with repeated rate hikes to try to calm things down. By the end of 2024, it had worked, for a while, at least.

Then 2025 arrived and prices started climbing again: about 2.6% in January, 3.0% in February, 3.5% in April. They eased to 3.4% in May, then nudged up to 3.6% in June and 3.8% in July and August. In September they remained at 3.8%, showing inflation was still well above the bank’s 2% target. With that backdrop the bank held the base rate at 4.25% through early summer before cutting it to 4.00% in August. Since then, including the November meeting, the rate has stayed at 4.00%,signalling a shift toward stability as mortgage rates settle.

Interest Rate Predictions

Looking ahead, most analysts agree that UK interest rates have way passed their peak, with the base rate reaching a high of 5.25% in August 2024 before beginning to decline. Now at 4.00% as of November 2025, earlier forecasts of rates climbing to 6% have been revised downward, though renewed inflation pressure adds uncertainty to the outlook. This shift suggests that interest rates may continue to ease, offering potential relief for borrowers following last year’s peak.

Market projections had pointed to at least one more 0.25% cut (likely in December) after August’s move to 4.00%. However, with inflation rising again in 2025, those expectations are less certain. After starting the year at 2.6% in January, inflation climbed to 3.0% in February, 3.5% in April, 3.6% in June, and 3.8% through July, August, and September. This stickiness may delay the timing of any further cuts.

With the base rate now held at 4.00% in November 2025, the mortgage market is entering a period of transition. Let’s explore what this evolving rate environment could mean for homeowners and prospective buyers.

Mortgage Rate Predictions 2026

Mortgage rates are expected to edge down through 2026, shaped by the Bank of England’s rate cuts, inflation trends, and global pressures.

As of November 2025, the average two-year fixed sits around 4.5%, with five-year deals close behind at 4.6%. That’s lower than earlier in the year but still higher than before 2022 when borrowing was far cheaper.

The base rate is 4.00% after the Bank’s cut in November. It followed smaller reductions earlier in the year, from 4.75% to 4.50% in February, then 4.25% in May. Inflation hasn’t fallen as smoothly as hoped, holding near 3.8% through July, August, and September, so the Bank kept rates steady at its November meeting.

Looking ahead, most forecasters expect a slow, steady drift lower. If prices keep cooling, mortgage rates could move toward the 3.5–4.0% range next year. But there’s still some uncertainty, inflation’s been stubborn before, and the Bank won’t rush until it’s sure things are settled.

Leading Economists Predictions

The Bank of England held the base rate at 4.25% in June 2025, then trimmed it to 4.00% in August, the first cut in over two years. Since then, it’s stayed there. Inflation has hovered around 3.8% through July, August and September, still above the 2% target but no longer climbing.

Most forecasts now see the year finishing with the rate unchanged at 4.00%. If prices keep easing into early 2026, a further small cut looks likely. The IMF expects the base rate to dip toward 3.75%, while some banks think it could reach 3.5% by mid-year.

For borrowers, that points to fixed mortgage rates slowly edging down. The average two- and five-year deals are still around 4.5–4.6%, but could move closer to 3.5–4.0% next year if the trend holds.Nothing’s guaranteed, though. Inflation could turn again or global markets could shake things up. For now, the feeling is steadier, a bit more calm, and maybe the first real signs of relief as 2026 gets underway.

Based on current market predictions, I expect the Bank of England could reduce the base rate by another 0.25% one more time before the end of 2025.

However, this outlook depends on inflation coming back under control, though the latest data shows it climbed again to 3.8% in June and remains the same in September 2025 — moving further away from the Bank of England’s 2% target. If inflation can be brought back under control, these rate cuts could ease borrowing costs in the coming months.

As the base rate drops, we’re starting to see a shift towards 2-year and 3-year fixed rates becoming more competitive than longer 5-year deals—the opposite of what we’ve seen over the past 18 months. Mortgage rates have already eased from 5% to just above 4%, and as we move further into 2025, they’re predicted to drop even further, potentially below 4%.

I’m also seeing growing interest in tracker mortgages for 2025, along with the likelihood of new, innovative products from lenders. These could include tracker deals that offer the flexibility to switch to a fixed rate during the term without incurring extra fees. – Steve Roberts

Fixed Rate Mortgages: Should You Fix Your Mortgage Rate Now?

In recent weeks, many mortgage lenders have withdrawn numerous fixed-rate deals and raised rates on their most competitive products, responding to concerns about potential further rate hikes by the Bank of England.

With the BOE base rate now at 4.00% and market sentiment still mixed, it may be wise to consider fixing your mortgage rate if you’re concerned about rising interest rates and managing monthly repayments.

Even if you’re currently on a fixed-rate mortgage set to expire in six months, you may still lock in a competitive rate now to begin when your current deal ends, avoiding early repayment charges from your existing lender.

• Should you get a 2 or 5 year Fixed Mortgage?

How is the Bank of England base rate set?

The Monetary Policy Committee of the Bank of England is responsible for setting its official base rate. Meeting approximately every six weeks, MPC meets to decide on any potential changes and publishes its decision and meeting minutes on its website.

The decision on setting the base rate is informed by several economic indicators, including employment, inflation, and GDP. The current Governor of the Bank of England Andrew Bailey continues to use an established list of 18 economic indicators as part of his Monetary Policy Committee decision-making process outlined by former Governor Mark Carney.

When is the market predicting mortgage rates will change?

The market’s outlook for mortgage rates has shifted significantly in recent months. On 19 June 2025, the Bank of England (BoE) held the base rate at 4.25%, before cutting it to 4.00% in August. At its meeting on 6th November, the Bank again held the rate at 4.00%. These decisions have been driven by a softer economic outlook but also by persistent inflationary pressures, which remain above the Bank’s 2% target.

The UK’s annual inflation rate rose to 2.6% in January, then climbed to 3.0% in February, 3.5% in April, and 3.6% in June, before reaching 3.8% in July, August and September. While inflation has eased from the double-digit peaks of 2022, it remains well above target, and the BoE has signalled it will proceed cautiously with any further rate cuts.

What to do with my mortgage in 2026?

The ability to remortgage and fix your mortgage at the same sort of rate has become more difficult over recent years as the rules surrounding the affordability checks when applying for a mortgage were tightened leaving some borrowers stranded on their existing deals.

It’s important to calculate the impact of future interest rate rises and seek advice from a mortgage expert ahead of time by following the steps below. Whether you are on a tracker mortgage, variable rate mortgage, or looking to remortgage your existing fixed rate deal that is coming to an end the steps below will take you a few seconds but could prevent your mortgage repayments crippling your finances in the future and help you secure fixed mortgage rates while they are still available.

• How soon can you remortgage before your fixed rate ends?

Step 1 – Determine your current mortgage situation

Before you can determine the best course of action for your mortgage, it is important to understand your current situation. This information includes what type of mortgage (variable, fixed rates, or tracker rates), your current rate, and loan term. If you need help understanding these details further, contact your mortgage lender or review your documents to gain a clear picture.

Step 2 – Calculate the impact of an interest rate increase on your mortgage payments

An interest rate rise calculator allows you to quickly assess the potential effects of an increase in interest rates on your monthly mortgage payments. Simply input details such as loan amount, term length, and current interest rate before increasing it in various scenarios to calculate potential changes in monthly payments based on different interest rate scenarios and figure out how much additional funds would need to be set aside in case an increase takes place. This tool gives a good indication of what to budget for in case an interest rate increase occurs.

Step 3 – Seek advice from a mortgage expert

If an interest rate increase will have an adverse impact on your mortgage payments, consulting a mortgage expert is highly advised. They can assess the housing market as well as your current financial situation and assist in understanding potential solutions such as fixed rate or alternative types of loans; also helping find you the most competitive rates and terms possible according to your unique situation.

Step 4 – Act quickly if you decide to fix your mortgage rate

When considering fixing your mortgage rate as the optimal course of action, acting swiftly is key. The lowest fixed-rate mortgage offers often vanish quickly when there are indications from the Bank of England of potential rate hikes; take immediate steps to secure one before it disappears! A mortgage expert can help compare different mortgage deals and assist in the application process to make sure you secure an excellent rate.

The best way to find out your mortgage options

One way to find the right mortgage options for you is to collaborate with an independent mortgage adviser. While price comparison sites may seem like an effective solution, it’s important to remember that many deals only available through advisers aren’t listed here and may only appear after credit checks have taken place—which could negatively impact future applications for loans.

Due to these considerations, working with an independent mortgage adviser is often beneficial; they can assist in finding you the most beneficial mortgage deal from lenders that will actually lend to you—approximately 70% of borrowers opt for this route. To start off your journey toward refinancing, reach out to an adviser or mortgage broker. With fixed-rate deals being withdrawn on a daily basis, it’s never been more important to be on top of your mortgage options before we see further interest rate rises.

Further reading

• What happens when my fixed rate mortgage ends?
• The Different Types of Mortgages Explained
• 2023 sees a surge in 35-Year and 40 Year Mortgage Terms
• House Prices Falling Boosts Mortgage Product Transfers

FAQs