Will UK Mortgage Rates Fall Further in 2025?

London: Mortgage rates are already falling ahead of the Bank of England’s crunch rate decision next week on May 8, but the tempting sub-4% deals now on offer from lenders belie a more complex pictures for savers due to exit fixed rate deals this year.

According to latest Rightmove data for May 1, 2025, the lowest rates for two-year and five-year fixed deals are 3.75% and 3.83%, respectively. This is much lower than the Bank rate, itself expected to fall, and lower than at the start of the year, when mortgage rates were hovering around 4%.

Interest rate swaps data currently shows traders unanimously expect an interest-rate cut from the Bank of England when its monetary policy committee (MPC) meets next Wednesday—amid significant feared global economic disruption from the Trump administration’s program of tariffs. The BoE’s decision will be announced on Thursday at noon. Until then, rates sit at 4.5%.

The expectation of falling rates is not the only reason lenders are on maneuvers, however.

“The end of Stamp Duty Land Tax relief last month could also be playing its part to incentivize lenders to push out more deals to entice new business,” says Rachel Springall, finance expert at MoneyFacts.

A tax paid by property buyers when they purchase a freehold, leasehold, or a new or existing property, or a property via a shared ownership scheme, the stamp duty thresholds have just been revised downward, forcing buyers to pay more.

The end of this era of stamp duty relief also explains a softening in UK house price growth.

According to data from Nationwide, UK annual house price growth slowed to 3.4% in April 2025. The average price of a house decreased month-on-month by 0.6% to £270,752 from £271,316.

“The softening in-house price growth was to be expected, given the changes to stamp duty at the start of the month,” says Nationwide’s chief economist Robert Gardner.

“The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays.

“Nevertheless, activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.”

These two factors—global economic disruption caused by tariffs, and the UK’s own stamp duty stimulus ending—put the UK’s mortgage market at a crossroads.

In the UK, homeowners have the option of buying properties and remortgaging them with different types of loan. Floating or variable-rate mortgages track the Bank of England’s base rate, although “trackers” are lower than the lender’s “standard variable rate.” Fixed-rate products, usually at two and five years in duration, are predominantly more popular. And they are linked to the Sterling Overnight Index Average (SONIA) rate.

Bank of England analysis notes that 800,000 fixed-rate mortgages, currently with an interest rate of 3% or below, are expected to expire every year, on average, until the end of 2027. Lots of people are due to remortgage, and lenders want their custom. Many will move on to much higher rates than they were used to.

During times of higher interest rates, homeowners can be forgiven for seeking shorter-term mortgage deals of two years rather than five—so they don’t pay more for longer. As rates are currently falling, people don’t want to be locked in to higher rates.

This is a marked contrast to the way homeowners behaved in the period of so-called “ultralow” interest rates in the wake of the global financial crisis. Then people want to lock in the lowest rates for the longest time period, with the added benefit of knowing what payments will be over this length of the mortgage.

Between February 2009 and May 2022, the Bank rate never rose above 1% and got as low as 0.1% in reaction to the covid pandemic shock. Five-year deals were extremely popular during that time as customers kept their costs lower for longer and borrowers used cheap debt to buy homes and grow businesses. Thereafter, as inflation rose in the wake of the pandemic and the Russian invasion of Ukraine, two-year rates rose above five-year rates as customers shifted to a shorter-term footing.

The latest data from Rightmove suggests average UK mortgage rates are 4.73% for a two-year fixed deal, higher than the 4.66% available on a five-year fixed deal.

Experts now expect this “mortgage rate inversion” to end as the Bank rate falls and savers remortgaging attempt to “lock in” the best possible rate for as long as possible.

“Since October 2022, the average two-year fixed rate has been higher than the five-year rate. It seems an end to such inversion could be coming, but this does largely depend on how swap rates will move in the coming weeks,” Springall says.