Mortgage rates

If the economy continues to falter, base rate and mortgage rates will inevitably fall a bit further over the rest of 2025. It's possible that we will see two-tier pricing, either better rates for those moving home over remortgaging, or potentially the cost of higher LTV deals may fall quicker than those rates for the lowest risk categories. Whilst a few base rate cuts have been factored into fixed rate pricing, any further talk of the economic slide will drag mortgage rates with it. It's a delicate situation no government relishes balancing, let alone homeowners.

Bank of England cuts seem to be on a knife edge lately, they react to the smallest movements in data each month. So I don’t think they will be totally priced in. Whilst the wind has been knocked out of their sails a little, interest rates should continue to reduce slightly over the rest of the year. They don’t need to plummet, borrowers want stability and a steady decline supports this. We need to see more rates beginning with a 3 by the end of the year.

It's clear that much of the market is already pricing in the expectation of a Bank of England base rate cut before the end of the year. We've seen modest reductions in fixed-rate mortgage pricing over recent weeks, driven largely by easing inflation data and shifts in swap rates.

However, while further rate cuts remain possible, lenders are acting with caution. Any downward movement in mortgage rates is likely to be incremental rather than dramatic. The cost of funds and lender margins continue to play a significant role, meaning we shouldn't expect a return to ultra-low rates seen in recent years.

In essence, the prospect of lower mortgage rates is already baked into much of the current product pricing. Unless economic conditions shift significantly, we are unlikely to see substantial reductions from here. The focus now will be on stability and sustained affordability as the market adjusts to a new normal.

The Bank of England will have no choice but to cut rates in the coming months. This is potentially good news for borrowers but this is mainly due to the atrocious handling of the economy by the incumbent government. With unexpected recent inflationary pressure and looming tax rises incoming, it’s likely the everyday person will still be out of pocket.

Although a rate cut is priced in for tomorrow, Andrew Bailey could shock the markets and keep rates on hold as inflation isn’t budging. That said, over the rest of the year we should see two more rate cuts, maybe even finishing 2025 at 3.5%. Next year should be more stable, but rates could still reduce to 3%. This is great news for home owners as these reductions are normally seen in new products from lenders.

There's a clear consensus that the Bank of England will likely cut rates further to tackle our sluggish economy - potentially great news for homebuyers and those remortgaging. Most analysts expect rates to drift down to around 3-3.5% by year-end, though don't expect dramatic plunges overnight.
The catch? Much of this optimism is already baked into current mortgage pricing, so lenders are being cautious with their rate cuts. Inflation remains stubborn and any economic wobbles could accelerate the pace of cuts, but stability seems to be the watchword rather than the ultra-low rates we've seen before.