Updated Mortgage Rate Predictions for 2025
Updated Mortgage Rate Predictions for 2025
There is one property topic that never goes out of fashion and that is rate speculation. Whether we’re weighing up the Bank of England’s next move, speculating about swap rates or musing on the direction of mortgage rates, many home movers are scanning the news for updates and insights.
And who can blame them? Every financial announcement has the ability to impact how much we borrow and how expensive it is to repay. Experts are already looking at 2025 with fresh eyes, with a new inflation update and an imminent Bank of England announcement.
Viewber has been keeping up with the speculation and statistics to bring you our rate predictions. Here are our thoughts on the burning questions.
When is the next interest rate announcement?
The Bank of England’s Monetary Policy Committee next meets on Thursday 6th February. Most of the members will come to the table with a pre-formed idea of what they’d like to see the base rate do next. During the meeting, they will vote for an increase, a decrease or a rate freeze, and the Bank will adjust the base rate according to the majority vote.
Will the Bank of England cut interest rates?
The fickle nature of financial markets makes it extremely difficult to make long-term base rate predictions. Economic experts want to see where swap rates (the interest rate banks and building societies pay when they borrow money from other financial institutions) and inflation are before confidently making a prediction.
Bullish base rate forecasts started emerging in January when UK inflation came down to a lower-than-expected rate, resting at 2.5%. Although still above the Government’s 2% target, it is thought this news will encourage the Bank of England to reduce the base rate on 6th February. By how much? A report in The Guardian suggests we could see the base rate cut to 4.5% – a 0.25% reduction.
What are the projected interest rates in 5 years?
In the medium-term, there is no overriding prediction regarding how many times the Bank of England will reduce the base rate in 2025. Some experts believe a cut in February may be the only one, while others are factoring in three cuts, which could see the base rate dip below 3% for the first time in two years.
Long-term, the Bank of England itself predicts an base rate of 3.7% in 2026 and 3.6% in 2027. Looking even further into the future, the financial website, Money To The Masses, predicts a base rate of 3.95% in January 2028 and 3.87% in January 2029.
Mortgage rate predictions 2025: will borrowing get cheaper?
If the Bank of England cuts the base rate in February, it could lead to friendlier lending conditions. Of particular interest will be the effect of a base rate reduction on mortgage rates.
If you’re wondering when mortgage rates will go down in the UK, even a forecast can prompt lenders to take action. If banks and building societies are positive a base rate cut is coming, they may reprice their mortgages in the run up to the monetary policy committee meeting, making new deals cheaper.
Borrowers with tracker mortgages will see a decrease in their monthly repayments in line with a base rate reduction, with lenders usually passing on the rate cut in a matter of days.
Where are mortgage rates now?
January has been a tale of two halves so far. A report published by Whatmortgage.co.uk using data from Moneyfacts illustrated the instability. On 22nd January 2025, the typical two-year fixed rate mortgage was 5.52% – compared to 5.47% on 8th January. A five-year fixed rate home loan was averaging at 5.30% on 22nd January 2025 – up from 5.24% on 8th January. That said, lenders including Halifax, HSBC and Leeds Building Society reduced their mortgage rates in January.
How much could mortgage rates fall by?
Financial experts do not like to be drawn on by how much mortgage rates could shift in the wake of a base rate reduction as there are many other factors at play. For example, mortgage rates crept up after the Autumn Budget 2024. At other times, lending targets need to be met and action is taken if there’s a shortfall. This often prompts banks and building societies to cut mortgage rates to attract new business and fend off rivals.
As a result of the variable factors and potential volatility, accurate mortgage rate predictions are impossible. Lloyds Banking Group, however, says mortgage rates are likely to range between 4% and 5% in 2025, which does represent a decrease. The long-term impact will be felt by new borrowers and those remortgaging.
The property industry is keeping everything crossed for a downwards trend for all key figures – base rate, inflation and mortgage rates. If the news is positive, we expect a peak in home moving activity.
If assisting a new crop of buyers, sellers and investors is something you need help with, please contact Viewber for our full suite of property visit services.
