If you’re living in the UK and thinking about buying a home or remortgaging, one question is probably at the top of your mind:
Will mortgage rates drop?
With everything from inflation and interest rates to energy bills and house prices constantly in the news, it can be hard to keep track.
In this blog, we’ll look at what’s going on with mortgage rates in the UK right now, what might happen next, and what it means for you.
What Are Mortgage Rates and Why Do They Matter?
Before we dive into predictions, let’s quickly recap what mortgage rates are and why they’re so important.
A mortgage rate is the interest you pay on the money you borrow to buy your home. It affects your monthly payments and how much you pay overall across the life of the loan. Even a 1% difference can add up to thousands of pounds over the years.
For example:
- A mortgage of £200,000 at 5% over 25 years could cost around £1,170 per month.
- The same mortgage at 4% would cost closer to £1,050 per month.
Where Are Mortgage Rates Right Now (June 2025)?
In June 2025, mortgage rates in the UK are still quite a bit higher than they were before the COVID-19 pandemic and the inflation crisis of 2022–2023. But there are signs they’re starting to come down.
Some lenders have started to offer two-year fixed deals below 4%, especially for people with large deposits or lots of equity. But those deals are still relatively rare.
Why Are Mortgage Rates Still Quite High?
Mortgage rates are influenced by a number of factors, but one of the biggest is the Bank of England base rate. This is the interest rate the Bank charges other banks to borrow money. It was raised sharply in 2022 and 2023 to help control inflation, peaking at 5.25%.
Since then, inflation has come down, and the Bank has started to cut rates slowly. As of June 2025, the base rate is 4.25%, down from 5.25% last summer.
So why haven’t mortgage rates dropped more?
- Lenders are being cautious. They don’t want to slash rates too fast in case inflation picks up again.
- Global uncertainty. Trade tensions, oil prices and wars in other parts of the world make banks nervous.
- Inflation is still above target. It’s fallen, but it’s still around 3.5%, above the Bank’s 2% goal.
- Long-term costs. Lenders also look at long-term borrowing costs (like swap rates and bond yields), which don’t always move in line with the base rate.
Will Mortgage Rates Drop Later in 2025?
Most experts say: Yes, but slowly and not dramatically.
Many analysts think we’ll see two more Bank of England rate cuts before the end of 2025. That could bring the base rate down to around 3.75%, possibly even 3.5%.
If that happens, we could see mortgage rates drop further. Some forecasts say:
- Two-year fixes could fall to around 3.75%
- Five-year fixes could dip to around 3.5%–3.8%
However, this depends on inflation staying under control and no major global shocks derailing things.
What Does This Mean for You?
Here’s how falling mortgage rates could affect different types of borrowers:
If you’re saving for a deposit or about to apply for a mortgage, lower rates could help you borrow more or reduce your monthly payments. But waiting too long might mean missing out on good house prices, especially if demand increases.
Many people are coming off cheap fixed deals from 2020–2021 and facing a big jump in payments. If mortgage rates drop further this year, you could get a better deal by switching later. But rates could also rise again if inflation comes back.
Higher interest rates have made life tougher for landlords. If rates drop, it could help improve profits and make it easier to remortgage.
4. Self-Build or Custom-Build Homeowners
Lenders in this space tend to follow wider market trends. If mortgage rates drop across the board, you may find better deals for your project.
Should You Fix Now or Wait?
This depends on your personal situation and how much risk you’re willing to take.
Reasons to fix now:
- You want peace of mind about your payments.
- You find a decent deal that fits your budget.
- You think rates might not drop much further.
Reasons to Wait:
- You’re still months away from needing a mortgage.
- You believe rates will drop further in late 2025.
- You’re open to a tracker mortgage that follows the base rate.
Remember: you can usually lock in a rate 3–6 months in advance, so it’s worth shopping around early.
At UK Mortgage Centre, we’re here to help you make informed decisions about your mortgage. Our experts can guide you through the process, ensuring you find the best solution tailored to your needs.
Call us on 01925 573328
Email: hello@ukmc.co.uk
Or book your own appointment to speak with one of our friendly advisers.
Let us assist you in making your next move a smooth and successful one.
Disclaimer
UK Mortgage Centre is a trading style of Refresh Mortgage Network Limited. Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. FRN – 826982. Registered in England & Wales: 11614569. As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages. The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
