Will mortgage rates decrease in 2025?

If you’re planning a property purchase this year, mortgage rate movement will be extremely important to you. The rates available could impact the house you ultimately end up buying and, indeed, whether you move altogether.
 
Generally speaking, buyers want mortgage rates to be as low as possible as it means lower interest paid on top of repayments. So, will mortgage rates be coming down in the near future? Let’s have a look… 

Mortgage rates are set by lenders but affected by several variables including:

When inflation goes up, money is worth relatively less in real terms. Lenders want to protect themselves and set higher interest rates.
 

Linked to inflation, the Bank of England Base Rate dictates how much banks pay to borrow money. In response to inflation, the Bank of England usually increases its Base Rate to slow spending. This has a knock-on effect as lenders protect themselves, and mortgage rates increase.

We are all aware of the current and recent global issues. Events such as the pandemic, and Russia/Ukraine war disrupt supply chains, increase prices of certain products e.g. oil and in turn push up inflation.

At the moment, mortgage rates are settled at around 3.5-5% but will mortgage rates go down in 2025? Forecasts actually predict rates will stay at this level for the rest of the year (even if inflation and base rate reduce).
 
Base rate dictates the interest rate banks and lenders pay the Bank of England to borrow money and directly impacts the interest rates available to the public. Although the Base Rate came down from 4.25% to 4% in August 2025, taking it to the lowest level in two years.
 
Average mortgage rates, August 2025

Mortgage type/length - Average rate (all lenders)
2 year fixed rate (75% LTV) - 4.15%
5 year fixed rate (75% LTV) - 5.25%
2 year variable rate (75% LTV) - 4.80%
Standard variable rate (SVR) - 6.74%

While mortgage rates are not predicted to come down in the near future, there is good news for buyers. The way some lenders assess mortgage affordability has changed, making it easier for people to borrow money.

When you approach a lender to discuss taking out a mortgage, they look at whether you can currently afford repayments at a particular rate but also carry out a ‘stress test’. This determines whether you could theoretically afford repayments if interest rates increased.

For example, if you were to take out a mortgage at 4.5%, your lender will look to see if you could also afford repayments at a much higher 8-9%. Even if you can afford the lower figure, you may fail the test and not be eligible for the mortgage deal.
 
The Bank of England has relaxed its guidance on stress testing, leaving lenders some flexibility, and many have reduced the test levels. Buyers may find it easier to pass the test and find themselves eligible for a mortgage. This is especially beneficial for first-time buyers.

Mortgage rates have come down since a peak in 2023 but are expected to plateau for the rest of 2025 between 3.5%-5%. If you’re planning a move, it’s important to keep an eye on what the rates are doing and discuss your plans with a mortgage adviser.
 
If you’re considering a new build and/or are a first time buyer, there are several schemes available that may make a purchase more affordable and are definitely worth investigating alongside careful mortgage choice.
 
At Beresfords, our estate agents in Essex are here to help you on your property journey and offer a range of services, including expert mortgage advice. We appreciate how daunting it can be to approach the property market and are happy to answer all your questions. Please get in touch to find out more.