UK mortgage rates in 2025: what you need to know

Where are mortgage rates now?

In early 2025, the average two-year fixed rate for a 75% LTV mortgage sits at around 4.2–4.8%, depending on the lender and your circumstances. Five-year fixed rates are typically slightly lower, in the 3.9–4.5% range, as lenders price in expected future rate cuts.

This is a significant improvement from the peaks of late 2022 and early 2023, when two-year fixed rates briefly exceeded 6.5% following the mini-Budget. However, rates remain meaningfully higher than the historic lows of 2020–2021, when two-year fixes were available below 1%.

Why did rates rise so sharply?

Mortgage rates are closely tied to the Bank of England base rate and to swap rates — the rates at which banks lend to each other over fixed periods. When inflation surged following the pandemic and Russia's invasion of Ukraine, the Bank of England raised base rate aggressively — from a historic low of 0.1% in November 2021 to a peak of 5.25% in August 2023.

The September 2022 mini-Budget caused a further spike in swap rates, as markets lost confidence in UK fiscal policy. This forced many lenders to withdraw products overnight, and when they returned, fixed rates had risen dramatically.

Since then, the Bank of England has begun cutting base rate — to 4.75% by the end of 2024 — and mortgage rates have fallen accordingly. However, rates tend to come down more slowly than they go up, as lenders reprice cautiously.

Fixed or tracker: which is right in 2025?

This is the question most borrowers are grappling with right now. The honest answer is that it depends on your circumstances and appetite for risk.

• The case for fixing

  A fixed rate gives you certainty. You know exactly what your payments will be for the next 2, 3, or 5 years, regardless of what happens to base rate. For most homeowners — especially those on tight budgets or with dependants — this predictability has real value. Five-year fixes are currently priced attractively relative to two-year deals.

• The case for a tracker

  If you believe rates will fall significantly in the next 12–24 months — and many economists do — a tracker mortgage means your payments will fall automatically as base rate is cut. Trackers typically have no early repayment charges, giving you flexibility to switch if the market moves unexpectedly. The risk is that if rates don't fall as expected, your payments stay higher.

• What we're seeing

  In early 2025, most of our clients are opting for two-year fixed rates, keeping their options open for when rates potentially fall further. Some are choosing five-year fixes for the peace of mind. Trackers are more popular with those purchasing or remortgaging without a chain, who want maximum flexibility.

When might rates fall further?

Most forecasters expect the Bank of England to continue cutting base rate through 2025, though the pace and scale of cuts is uncertain. Expectations at the start of 2025 point to base rate settling somewhere around 3.5–4.0% by the end of the year, though this depends heavily on inflation data, global events, and UK economic performance.

Importantly, fixed mortgage rates don't track base rate directly — they track swap rates, which are forward-looking. Much of the expected base rate reduction may already be "priced in" to current fixed rate products. This means the dramatic falls some borrowers are hoping for may not materialise in fixed rate products even as base rate comes down.

Our view: don't wait for the "perfect" rate. If you need to buy or remortgage, get proper advice now and secure the best rate currently available. Trying to time the market is rarely a winning strategy.

How to get the best deal available to you

The headline rate advertised by a lender isn't necessarily the best deal for your circumstances. Here's how to maximise your chances of securing a competitive rate:

• Use a specialist mortgage broker — we have access to deals across the whole market, including products not available directly to consumers
• Increase your deposit if you can — even moving from 10% to 15% can unlock significantly better rates
• Check and improve your credit score before applying — even minor improvements can make a difference to the rate offered
• Consider the total cost, not just the headline rate — factor in any arrangement fees, which can add £1,000–£2,000 to the overall cost
• Start early — you can usually lock in a rate up to 6 months before your current deal ends, giving you time to find the best available product
• Review your protection — as rates change, so does the mortgage balance, which can affect how much life insurance you need

Should I overpay my mortgage while rates are higher?

If you have savings earning less than your mortgage rate — which is possible given current conditions — overpaying your mortgage can make strong financial sense. Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without incurring an early repayment charge.

Overpaying reduces your outstanding balance faster, which means you pay less interest over the life of the mortgage and may be able to access better rates at your next renewal (since your LTV will be lower).

However, if you have high-interest unsecured debt — credit cards, personal loans — paying those off first will usually save more money in the long run.

Frequently asked questions