What next for mortgage rates and how long should you fix for?

UK mortgage markets remain a focal point for prospective buyers and homeowners, many of whom are asking what is next for mortgage rates as they plan their next steps.

With fluctuations in interest rates, inflation beginning to show signs of easing and our monetary policy under constant review, the question arises: how long should you fix your mortgage, and what should you expect next?

Current mortgage rate trends

If you're wondering what is next for mortgage rates, it's useful to look at current trends. Since early 2025, lenders have steadily reduced fixed rates in response to the Bank of England's rate cut.

The current average rate for 2-year fixed mortgages sits at 4.87%. A 5-year fixed mortgage rate sits just below 4.69%.

As expected, a higher loan-to-value (LTV) would mean a higher rate and vice versa with a lower LTV.

What factors influence mortgage rates, and why are interest rates so high?

In December 2021, the Bank of England (BoE) increased interest rates to combat inflation.

Between December 2021 and July 2024, we saw rates continue to rise until we peaked at 5.25%.

We are now beginning to see inflation rates come down.

As of March 2025, Inflation sits at 2.8%, 0.8% shy of the 2% target that the BoE has set. Because of this, the BoE will likely cut interest rates again.

As of March 2025, interest rates sit at 4.5%, a 0.75% decrease since July 2024.

Since August 2024, mortgage rates have slowly declined—a clear, direct correlation following the July interest rate cuts.

My fixed-rate mortgage ends in 2025; what should I do?

So, your fixed-rate mortgage is nearing the end, and you are wondering what to do next. A key question to ask is what is next for mortgage rates, as this will guide your decision.There are a few options available to you.

If you do nothing, you move onto your lender’s Standard Variable Rate (SVR) by default. 

Lenders usually charge higher rates than the fixed-rate deals available on the market. This means your monthly payments will likely go up.

You can also remortgage with your current provider or switch to a new one. If you struggle with repayments, you can switch to an interest-only mortgage.

What are the pros of fixing my mortgage?

The major pro of fixing your mortgage is protection from potential increases in interest rates. You may find it easier to budget when fixing your mortgage, and ultimately, a fixed-rate mortgage protects you from any changes in circumstances.

You can also select a term in line with your needs (2, 5, 10-year terms).

With interest rates high, fixing your mortgage will likely offer better rates than the SVR.

What are the cons of a fixed-rate mortgage?

The obvious factor here is potentially missing out on lower rates.

If interest rates drop while you stay on a fixed rate, you will miss out on those lower repayments. Another factor to consider is early repayment charges. You may need to sell or move. These will also likely result in a fee.

How long should I fix my mortgage?

You should consider several factors before deciding how long to fix your mortgage. Risk tolerance and financial stability are a few factors to consider. You max benefit from a fixed-rate mortgage if you have a low LTV as opposed to someone with a high LTV.

Mortgage rates have been dropping since July 2024, prompting many to ask what is next for mortgage rates before locking into a fixed term. A two-year fixed mortgage will protect you from any short-term fluctuations in interest rates.

The idea is in a few years, you can remortgage at a lower rate. The truth is there are no guarantees. Although rates have been dropping, there is the risk of rates rising too.

You also want to decide how much risk you can deal with. Are you risk-averse? Or would you consider taking some risk that could leave you better off?

Decipher your attitude towards risk and think about how uncertainty makes you feel.

A longer fixed-term mortgage puts your mind at ease if you are risk-averse. Instead of a 2-year term, you may opt for a 5-10-year fixed term.

Is a fixed rate worth it?

It all comes down to your current circumstances. What is your current financial situation? Do you crave security, or are you open to a bit of risk?

Yes, you risk locking yourself into a mortgage and potentially missing out on lower rates, especially if what is next for mortgage rates includes further cuts.

However, a fixed rate allows you to budget better and gives you peace of mind. This is something you forego by going with a variable rate.

Variable rates, on the other hand, can work out a lot cheaper. It gives you flexibility, and you can lock in a fixed rate if interest rates drop to a reasonable level.

There is also the risk of rates going the other way. You also run the risk of weighty fluctuations in your monthly repayments.

Get expert advice

Ultimately, you’ll need to base your decision to fix your mortgage, and for how long, on what is next for mortgage rates. With rates showing signs of decline, now is the time to weigh your options carefully and seek tailored advice to make the most informed decision. 

Let Regulated Advice match you with a mortgage advisor for expert advice.