What’s Happening with Mortgage Rates in 2025?

Back in May, the Bank of England trimmed its base rate ever so slightly – from 4.50% to 4.25%. Sounds small, doesn’t it? But in the world of mortgages, even a quarter-point drop can ripple through the market like someone pulling the plug out of a full bathtub.

This modest shift came as inflation cooled (though not quite as quickly as the Bank would like), prompting a cautious pause before any further cuts. As of July 2025, the average five-year fixed mortgage deal at 75% loan-to-value (LTV) hovers around 5.09%. If you’re after a two-year fix, you might come across slightly lower rates – closer to 4.75%. Not exactly bargain-basement, but not sky-high either.

Will Mortgage Rates Go Down Further?

In short: possibly, yes. But don’t expect dramatic drops.

Most experts predict a slow-and-steady decline for the rest of 2025 – as long as inflation continues its journey back towards that golden 2% target. A bit of lender competition could also help nudge rates down, especially for borrowers with clean credit records and healthy deposits.

Some insiders reckon the best mortgage rates might slide to around 3.25-3.5% by the end of the year. That could make a real difference over the life of a mortgage, especially for those brave souls locking in for five years or more. Still, unless there’s a significant shift in inflation (or a surprise from the Bank of England), this decline is expected to be more of a gentle waltz than a freefall.

Want to keep tabs on what’s coming? Our interest rate predictions page breaks it down month by month.

Five-Year Fix or Two-Year Tease?

Ah, the age-old question. Five-year fixed mortgage deals offer stability, but usually come with slightly higher rates. Two-year fixes might give you a bit of upfront breathing room, but you’ll be refinancing again before you know it.

Right now, the five-year fix averages 5.09% at 75% LTV, while two-year fixes float just beneath at 4.75%. If you’re expecting rates to drop further in 2026, a shorter fix might be tempting – you could bag a better deal down the line. On the other hand, locking in a medium-term deal could protect you from any short-term surprises.

Thinking of Remortgaging? Timing Is Everything

If your current deal’s nearing its end, now’s the time to start planning. The best time to remortgage in 2025? Experts suggest it’ll likely be during a rate drop or when lenders roll out attractive incentives to steal a march on the competition.

Here’s what to keep in mind:

• Watch the Bank of England base rate. Even a small change can sway lenders to tweak their offers.
• Scan the market frequently. Lenders are quick to change their rates – sometimes weekly.
• Get your ducks in a row. Bigger deposit? Strong credit score? You’re more likely to unlock the cheapest mortgage deals this July.

Don’t forget – remortgaging takes time. You’ll usually want to get the ball rolling three to six months before your current deal ends. That gives you room to shop around and, if needed, rope in a broker to hunt down hidden gems.

Need a hand? Our handy remortgaging advice hub is packed with tips to help you plan your next move.

So… When Will Mortgage Rates Go Down?

If you’re looking for a big bang, you might be waiting a while. Analysts expect any drop to be slow-moving – think gentle slope, not ski jump. But the mood music is optimistic. Provided inflation doesn’t spike again, the gradual easing of rates could continue through late 2025.

That’s good news for:

• First-time buyers watching for a more affordable step onto the ladder
• Homeowners considering a five-year fix at more comfortable levels
• Anyone stuck on a standard variable rate after a deal expired (we see you!)

Final Thoughts (From Ruth in Humberside)

Here’s how I see it: Now’s a good time to start laying the groundwork. Even if you’re not planning to move or remortgage this minute, being ready means you can pounce when the stars (and rates) align. Keep an eye on the mortgage market trends, stay curious, and don’t be afraid to haggle. Lenders want your business – and a little savvy shopping can save you thousands over the life of your loan.

Oh, and if your current mortgage deal’s not due for renewal yet? Stick the kettle on, bookmark our latest best mortgage rates roundup, and check back soon. It pays to be the early bird in a shifting market.

Your friendly mortgage de-mystifier,
Ruth 🏡🫖

Bonus tip: If you’ve never used a mortgage broker before, consider giving it a go this year. Many are fee-free and have access to exclusive deals you won’t find online. It’s like having a bargain-hunting best mate in your corner – what’s not to love?