How far mortgage rates could fall in 2025, according to experts

The cheapest mortgage rates could reach 3.5 per cent by the end of the year if the Bank of England continues to cut interest rates as expected, experts predict.

The Bank of England is widely expected to cut the base rate from 4.5 per cent to 4.25 per cent on Thursday, and mortgage rates have already been falling in advance of this.

Experts say steady reductions are expected throughout the rest of the year but have warned potential customers to “not wait” as cuts are never certain, and rates can go up as well as down.

They have also said that although lower mortgages are good news in a sense, the expected lower rates come against a backdrop of expected stagnation in the economy.

Lower rates would be welcome news for first-time buyers and could provide some relief for those who are coming off two-year deals that are priced well above 4 or even 5 per cent.

It would also provide a narrative for the Labour Government that it is succeeding in their core measure of political success – putting more money in people’s pockets.

But set against the bigger picture of why rates will likely fall – in order to stimulate a sagging economy – it is not all good news for the government. Cheaper mortgages may be offset against fewer jobs, or lower pay rises.

Mortgage pricing is based on multiple factors, but a key element behind the pricing of fixed deals – the most common type – is swap rates.

These are based on long-term predictions for where the Bank of England base rate will go in the future, and they have fallen since Donald Trump announced his plans to hit multiple countries with tariffs – taxes on imports last month.

“If the base rate comes down, lower mortgage rates are possible, but the big picture isn’t one of amazing news, because the base rate is more likely to fall if the economy is performing badly,” explained Aaron Strutt of Trinity Financial.

Financial markets expect multiple further interest rate cuts in 2025, sending rates below 4 per cent.

This could result in two-year mortgage fixes reaching 3.5 per cent for customers with 40 per cent deposits or equity in their home – known as 60 per cent loan-to-value (LTV) – according to Nick Mendes of John Charcol brokers.

“Fixed mortgage rates are expected to continue their gradual decline throughout 2025. Swap rates, which heavily influence fixed-rate pricing, have eased in recent months, and increased competition among lenders is helping to push pricing down further,” he said.

Full broker predictions can be found below.

What could happen to mortgage rates in 2025, according to experts

Nick Mendes, mortgage technical manager at John Charcol brokers, said: “By the end of the year, we could see leading two-year fixed rates settle around 3.5 per cent, with five-year fixes close behind at approximately 3.6 per cent, particularly for borrowers with a deposit of 40 per cent or more.

“Fixed mortgage rates are expected to continue their gradual decline throughout 2025. Swap rates, which heavily influence fixed-rate pricing, have eased in recent months, and increased competition among lenders is helping to push pricing down further.

“Substantial drops are unlikely unless the Bank of England base rate falls significantly to around 2.5 per cent, which is not currently forecast.
“Without that kind of move, fixed-rate reductions will likely be modest and gradual, rather than sharp or sudden.

“As a result, borrowers should not wait for rates to collapse but rather focus on securing good value based on their individual needs and timing.”

Aaron Strutt, product and communications director at Trinity Financial, said: “With multiple interest rate cuts, lenders offering at 3.5 per cent is probably not unreasonable. That is just one scenario though of course.

“If the base rate comes down, lower mortgage rates are possible, but the big picture isn’t one of amazing news, because the base rate is more likely to fall if the economy is performing badly.

“As I always say though, if you need a mortgage now, you need a mortgage, so it’s not always a case of being able to time it exactly to when rates will be at their lowest.”

Lewis Shaw, owner at Shaw Financial Services, said: “If – and it’s an if so big you could see it from space – everything remains equal, we may see many more sub-4 per cent mortgages towards the end of the year, possibly as low as 3.5 per cent for 60 per cent LTV. Or at least that’s where the current data looks to be heading.

“However, with so much global volatility from Trump’s trade war, Ukraine and Russia, the prospect of escalating tensions between India and Pakistan, and our own domestic issues, it’s anyone’s guess where we’ll be by December.

“That said, a nuclear winter will almost certainly see swaps tumble. The only reliable constant remains uncertainty.”