Will mortgage rates go down in 2025?

If you're a current homeowner or first-time buyer in the UK, you're no doubt watching interest rates very closely right now. After around 2-3 years of steep rises, many are asking the same question: Will mortgage rates go down in 2025?

The short answer is yes, but you shouldn't expect dramatic drops to happen overnight. Even if, the Bank of England (BOE) lowers the base rate in August 2025.

It always takes time for mortgage lenders to adjust rates on fixed-rate products to reflect any cuts.

Here we'll look at the outlook for UK mortgage rates for the remainder of 2025. And what's influencing the changes, and what it means for your mortgage.

What affects mortgage interest rates and what to watch

A mix of factors, including inflation, unemployment, economic performance, central bank policies, and global market conditions, all influence interest rates.

Ultimately, they determine will mortgage rates go down in 2025 or remain steady.

Inflation

Central banks tend to raise interest rates in response to rising inflation to help stabilise prices and slow down spending. When inflation is low, central banks tend to lower interest rates to stimulate growth and encourage borrowing.

Although UK inflation has eased from its peak in 2023, it remains stubbornly high at around 3.6%, which is well above the Bank of England's ideal target of 2%.

Economic performance

When economic growth shows signs of rapid expansion, an increase in interest rates may help to manage inflation and slow things down. When growth is weak, lower interest rates help to encourage borrowing and investment and, in turn, help support the overall economy.

Unemployment

Low unemployment means typically the economy is strong, but it often leads to wage growth and inflation. Central banks look closely at unemployment and wage growth when reviewing interest rates.

Global market conditions

Unpredictable world events such as the recent USA global tariffs bill can disrupt supply chains and global demand, which can also impact domestic interest rates.

Shifts in currency exchange rates can also affect inflation; a weak currency may cause inflation to rise.

Bank of England's base rate forecasts and expectations

The Bank of England meets eight times a year to discuss and review interest rates. The next meeting is Thursday, 7th August. And there will be further meetings in September, November and December 2025.

Most analysts and economists looking at the Bank of England’s decisions are asking will mortgage rates go down in 2025, and the consensus is that rates will reduce gradually throughout 2025 and into 2026.

 The Bank is likely to implement cuts slowly and with extreme caution. A weakening labour market and persistent inflation will play an important part in rate cut decisions.

The Bank of England base rate currently stands at 4.25%. However, many economists predict the Bank will announce a 0.25% cut on Thursday, 7th August.

Analysts from some major banks predict two base rate cuts in August and November.

However, others are saying interest rates will remain on hold in August and there will be just one cut of 0.25% before the end of 2025. Therefore, one cut of 0.25% will bring the base rate down to 4% and two cuts will bring it down to 3.75%.

Rising unemployment, now at 4.7%, slow wage growth, and weaker business activity. These are all increasing the case for potential easing regarding monetary policy.

What will cuts mean for different mortgage types?

Will mortgage rates go down in 2025? Below, we explain below how falling mortgage rates will affect different mortgage types.

Tracker Mortgages

If you're on a tracker mortgage, your monthly mortgage payments will reduce almost instantly after any Bank of England base rate cut. Therefore, this should be a benefit to around 600,000+ UK households that are on tracker mortgages.

Standard Variable Rate (SVR)

Borrowers on SVR mortgages may see instant reductions, but lenders aren't obliged to pass on cuts and can be slow to do so.

If your mortgage is an SVR mortgage, check with your provider following any BOE announcement of base rate cuts. Your provider should keep you fully informed of any changes to your monthly payments.

Fixed Rate Mortgages

If you're on a fixed-rate mortgage, your payments won't change until your deal ends. But new fixed rate offers are already falling in expectancy of cuts, and major lenders like Nationwide, Halifax, and HSBC are starting to offer fixed rates of 4% or less.

Expectations for mortgage rate deals from July 2025

Mortgage rates have eased slightly since their peaks in 2023/2024, but many still wonder will mortgage rates go down in 2025 further and bring even more competitive deals.

The best two-year fixed deals are now around 3.75%, and five-year fixes tend to be around 3.8% and 4.0%. Tracker mortgages, as they are directly linked to the base rate, are slightly higher but set to benefit quickly from any rate cuts.

Should the expected base rate cut, or cuts, eventuate, fixed rates may drop a further 0.25% down to 3.5% for two-year fixes, and around 3.75% for five-year fixes during the last quarter of 2025.

Below are the average mortgage rates according to Rightmove as of 2nd August 2025:

• Average 2-year fixed mortgage rate at 60% LTV is 3.90%
• Average 5-year fixed mortgage rate at 60% LTV is 4.02%
• The Average Standard variable rate (SVR) is 7.60%

It's important to keep in mind that more competitive fixed-rate deals could be available in the first half of 2026. Unless there are any unexpected major upsets, economists and analysts predict that interest rates will drop to 3.5% by June 2026 and could be as low as 2.5% by late 2027.

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

So, your fixed-rate mortgage is coming to an end soon, and you are wondering what to do. We've already looked at what may happen with fixed-rate deals in the immediate future, so it may not be the best choice to rush into a new fixed-rate deal instantly.

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.

Therefore, this means your monthly payments will likely go up briefly. However, it gives you time to assess when the best time would be to move on to a new fixed-rate deal.

If you need the security and peace of mind that a fixed-rate mortgage gives you. You can shop around for a while until fixed rates become more competitive.

By moving on to your lender's SVR for 6-12 months, your payments may be higher for a while. However, you could be looking at saving much more in the long run if new fixed-rate deals fall by 1% or even as much as 1.5%-2%.

Get expert advice

Right now, mortgage interest rates are constantly changing, but are ultimately dependent on the Bank of England's base rate.

Even the best economists and analysts cannot predict precisely what will happen or exactly when. Mortgage rates will be coming down gradually, but there will be no dramatic overnight changes.

As with all significant financial decisions, it's best to seek financial advice before committing to something you may regret in the future. It's important to take time and weigh up your options carefully before making a final decision.

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