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'Mortgage rates likely to start with a 3 once more - we may well see a bumper start to the New Year'

Journalist: Frances Ivens, Telegraph

ended 17. December 2024

As we approach the end of 2024, the mortgage market is poised for a pivotal start to the New Year. With the Bank of England expected to hold the base rate steady this month and the housing market still adjusting to recent economic challenges, all eyes are on lenders to see if they will kick off 2025 with competitive rate cuts. Experts were asked what’s likely to happen to mortgage rates in January, whether rates could dip below 4%, and if lenders are set to encourage new business in the first quarter.

Here’s what the UK’s leading mortgage experts had to say about the outlook for 2025:

12 responses from the Newspage community

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Andrew Montlake
CEO at Coreco
January 2025 looks set to be no different from other years when lenders aim to get out of the blocks quickly and start the year well. Whilst we do expect a selection of 'Winter Warmers' to entice borrowers, much depends on the rhetoric of the Bank of England at their next meeting and its associated effect on swap rates. With changes in Stamp Duty edging ever closer and mortgage rates likely starting with a 3 once more, we may well see another bumper start to the New Year. However, we have been here before, and things often have a habit of quickly turning due to any number of global, political, or economic issues. As ever, trying to play the market will be fraught with danger.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
Swap rates determine rate cuts, and these are forward-looking. While the Bank of England is not expected to cut rates this week, markets are anticipating base rate cuts in 2024, which could lead to mortgage rates edging down slightly. I don't think we'll see a material shift downward, but many lenders will want to start the new year on a strong footing, which could lead to further marginal cuts in January. The inflation data coming out this week could also be a contributing factor. If it comes in higher than expected, it could mean rates have bottomed out for now. There are many variables at play, so it's a tough call.
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Ben Perks
Managing Director at Orchard Financial Advisers
In January of this year, we saw the rate war. Whilst exciting, it set us off on a turbulent year of pricing by lenders. Rates should continue to trickle down in January 2025, but we don’t need sudden drops. Stability is key for rate success next year.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Lenders are likely to start 2025 with a burst of optimism, rolling out competitive mortgage deals to attract new business in January. However, just like in 2024, this enthusiasm will likely be short-lived as market pressures and economic realities take hold. Without decisive action from the Bank of England to cut rates and provide stability, any early momentum could quickly fizzle out.
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Rohit Kohli
Director at The Mortgage Stop
With the transition of power in the US and Trump likely wanting to land some early wins, I think there will be too much uncertainty for rates to drop fast in January. We may even see some increases. I am hoping for a steady fall this year rather than the price war we saw in early 2024.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
With a hold decision widely expected, lenders will already have priced that in. I don't expect any base rate reduction until the economy is likely in recession in January. Mortgage lenders will need some encouragement before any meaningful reductions are made.
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Justin Moy
Managing Director at EHF Mortgages
Mortgage lenders will trim margins on fixed-rate deals irrespective of what the Bank of England announces, as long as swap rates support such a move. I suspect the base rate will stay the same for a few months, but given that around 90% of mortgages are not priced via this, mortgage lenders will be eager to support borrowers looking to buy before the end of the current Stamp Duty thresholds.
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Simon Bridgland
Broker at Charwin Private Clients
Entering 2025, a few lenders will be keen to start the year with gusto, hitting their numbers for the first quarter. If they are strategic, they could monopolize the panicking FTB market scrambling to beat the March 30 Stamp Duty cliff edge. I’m not expecting a sharp drop in fixed rates, as that could simply mean a rebound upward if rates are reduced too much too soon. I expect to see a light and steady reduction during the first half of the year.
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David Stirling
Independent Financial Adviser at Mint Wealth
We should expect last week's rate cuts to mark the beginning of the January sales from lenders, continuing for the rest of the month. Quarter 1 of 2025 should be very strong, with borrowers trying to complete before April when Stamp Duty levels are reduced, pushing more people into paying tax on property purchases. As with any prediction, we could be hit with a plethora of world crises that ultimately affect the swap rates banks use to lend to each other. However, optimism remains that 2025 will be better for borrowers.
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Mike Staton
Director at Staton Mortgages
2025 will be a big year for mortgage lending. I firmly believe the base rate will hit 2.75% by the end of November 2025. January will see a multitude of lenders fighting to be top of the rate pile as they look to start the year with a bang. A base rate reduction on December 19 will begin a domino effect, causing rates to fall to more palatable levels. The losers of 2025 will be the small segment of the population that opted for execution-only options and fixed on five-year rates in excess of 6%. The ERCs these customers will pay to relieve the financial burden they’ve placed themselves under will be astronomical, leaving lenders to cash in on a payday I have seen coming for the last two years.
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Elliott Culley
Director at Switch Mortgage Finance
Predictions for the 2025 mortgage market suggest we could see base rate reductions throughout the year. Provided the insight leading up to the MPC meeting on February 1 is positive, we may see rate reductions across the market ahead of their decision. With the economy appearing to be in poor shape, it’s likely that base rate cuts will emerge early in 2025, helping the mortgage market.
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Iain Swatton
Director at Exemplar Financial Services
Lenders are expected to cut rates in the new year, likely triggering a price war as they compete to attract borrowers. This move could energize the mortgage market, offering fresh opportunities for buyers and those looking to remortgage. With a Bank of England base rate cut also on the horizon, the environment could become even more favorable. However, challenges remain for existing borrowers coming off historically low fixed rates and facing higher payments, all while the Stamp Duty deadline adds additional pressure in an already dynamic market.