UK Mortgage Rates Forecast 2025: Expert Analysis & Predictions

If you're buying a home, remortgaging, or wondering whether to fix your rate, understanding where mortgage rates are heading is crucial. This guide analyses current trends, expert forecasts, and practical strategies for different scenarios.

Current Mortgage Rates: November 2025

Rates as of late November 2025. Actual rates depend on LTV, credit history, and lender.

What's Driving Mortgage Rates?

Bank of England Base Rate

The base rate is the foundation for all mortgage pricing. After peaking at 5.25% in August 2023, the MPC has been cautiously cutting rates as inflation has moderated. The current 4.75% rate reflects a balance between controlling inflation and supporting economic growth.

Swap Rates

Fixed mortgage rates are primarily influenced by swap rates - the rates at which banks can borrow for fixed periods. 2-year and 5-year swap rates have been declining, which is why fixed rates have come down. However, swap rates can move independently of the base rate based on market expectations.

Inflation

CPI inflation has fallen from its 2022 peak but remains above the 2% target. The Bank won't cut rates aggressively until inflation is sustainably at target, which tempers expectations for rapid mortgage rate falls.

Competition

Lenders are competing for business in a subdued housing market. This competition has helped bring rates down faster than swap rates alone would suggest, as lenders accept lower margins to maintain volume.

Expert Rate Forecasts for 2025-2026

Fixed vs Variable: The 2025 Decision

Case for Fixing Now

• Rates have already fallen significantly from 2023 peaks
• 5-year fixes offer good value if rates stay elevated
• Certainty of payments helps budgeting
• Protection if inflation surprises to the upside

Case for Waiting or Tracking

• Further rate cuts expected through 2025
• Trackers let you benefit from falling rates immediately
• Short 2-year fix gives flexibility to reassess
• Rates could fall further if economy weakens

Practical Strategy

Consider your circumstances:

Remortgage Strategy 2025

If your current deal is ending, here's how to approach remortgaging:

6 Months Before Expiry

• Start researching available rates
• Check your current lender's retention deals
• Get your documents ready (payslips, bank statements, ID)

3-4 Months Before Expiry

• Apply for new mortgage (most lenders allow 6-month rate locks)
• Compare multiple lenders - use a broker if needed
• Lock in a rate - you can often switch if better deals emerge

If Rates Fall After You Lock

• Many lenders allow you to switch to a better rate before completion
• Some brokers will rework applications if significantly better deals appear
• Don't delay completion hoping for marginal improvements

First-Time Buyer Outlook

For first-time buyers, the picture is mixed:

Positives

• Falling rates improving affordability
• Less competition than 2021-2022
• Government schemes still available (Lifetime ISA, First Homes)
• More realistic asking prices in many areas

Challenges

• Higher rates than pre-2022 mean lower borrowing capacity
• Tighter affordability checks from lenders
• Deposit still a major barrier
• House prices remain elevated historically

How Much Can You Borrow?

Use our Mortgage Calculator to see how current rates affect your borrowing capacity. Generally, lenders offer 4-4.5x salary, but affordability assessments may reduce this.

Historical Context

To understand where we are, consider historical averages:

Current rates, while higher than the exceptional 2020-2021 period, are roughly in line with the pre-financial crisis "normal" of 5-6%.

What Could Change the Outlook?

Rates Could Fall Faster If:

• Inflation drops below target
• Economy enters recession
• Global economic weakness
• Banking stress increases competition

Rates Could Rise or Stay Higher If:

• Inflation proves stickier than expected
• Strong wage growth continues
• Global energy/commodity shocks
• Government increases borrowing significantly

Frequently Asked Questions

Should I wait for rates to fall before buying?

Time in the market often beats timing the market. If you find a suitable property at a fair price, the marginal rate improvement from waiting may not compensate for rising prices or missed opportunities. Focus on what you can afford today.

Can I negotiate mortgage rates?

Directly, usually not. However, using a broker can access exclusive deals, and having good credit and a larger deposit gets you into better rate bands. Always compare multiple lenders.

What's better - 2 or 5 year fix?

Currently, 5-year fixes offer better rates than 2-year fixes (inverted yield curve). If you value certainty and plan to stay put, the 5-year fix offers better value. If you want flexibility or expect rates to fall significantly, a 2-year fix preserves options.

When will rates return to 2% like in 2021?

Unlikely in the foreseeable future. Those rates required emergency monetary policy (near-zero base rate). Most economists expect "normal" rates to settle around 3-4% long-term, which would translate to fixed rates of 4-5%.

Final Thoughts

The UK mortgage market is normalising after the volatility of 2022-2023. While rates won't return to emergency lows, the current trajectory suggests continued gradual improvement through 2025.

Key takeaways:

• Rates have fallen significantly and further modest falls are expected
• 5-year fixes currently offer better value than 2-year
• Don't let perfect be the enemy of good - a reasonable rate today beats gambling on tomorrow
• Never let yourself fall onto SVR - always arrange a new deal in advance
• Use a broker to access the full market