As we approach the end of 2024, many homeowners and prospective buyers are asking the same question: Will mortgage rates go down in 2025?
After a period of economic uncertainty and rising interest rates, the outlook for mortgage rates in the coming year is a key concern for anyone looking to buy, remortgage, or invest in property.
At Model Financial Solutions (Model FS), we specialise in helping clients navigate the mortgage market with expert advice and access to the most competitive deals. In this article, we explore the key factors shaping mortgage rates in 2025 and offer insights to help you plan ahead.
A Recap of Recent Mortgage Rate Trends
The UK mortgage market has seen significant changes over the past few years:
2020-2021: Mortgage rates hit historic lows due to the Bank of England's base rate of 0.1%.
2022-2023: Rising inflation and economic challenges led to sharp increases, with the base rate reaching 5.25% by late 2023.
2024: Rates stabilised as inflation began to ease, though they remained higher than pre-pandemic levels.
Understanding this context is essential when looking ahead to mortgage rate forecasts for 2025.
Will Mortgage Rates Go Down in 2025?
While no one can predict the future with certainty, many financial experts and economists believe there is cautious optimism for 2025. Key factors influencing mortgage rates include:
1. Bank of England Base Rate
The Bank of England (BoE) base rate plays the biggest role in determining mortgage rates. In 2024, the BoE is expected to hold the base rate steady to curb inflation. However, as inflation continues to decline, experts forecast that the base rate may begin to fall gradually in 2025.
What This Means for You: Lower base rates could lead to reduced mortgage rates, particularly for those on tracker mortgages or looking to remortgage.
2. Economic Stability
As the UK economy stabilises, lenders are likely to gain more confidence in offering competitive mortgage products. Factors such as improved GDP growth, lower inflation, and a healthier employment market could contribute to downward pressure on mortgage rates.
What This Means for You: Improved economic conditions could result in better fixed-rate mortgage deals for new and existing borrowers.
3. Lender Competition
Lenders are expected to compete more aggressively for business in 2025, particularly as demand for new mortgages remains steady. Increased competition often leads to better mortgage rates and product options for borrowers.
What This Means for You: If lenders compete to attract customers, you may find attractive fixed-rate mortgage deals.
4. Housing Market Activity
The UK property market is also a significant driver of mortgage rates. If house prices remain stable or grow moderately, lenders may offer competitive rates to support new buyers and remortgagers.
What This Means for You: Buyers and home movers could benefit from more affordable mortgage options as housing market confidence improves.
How to Prepare for Falling Mortgage Rates in 2025
Even if mortgage rates are forecasted to fall, being proactive will ensure you are ready to take advantage of any reductions. Here are our top tips:
Review Your Current Mortgage Deal If your fixed-term mortgage is ending in 2025, start planning now. Contact our advisers at Model Financial Solutions to explore your remortgaging options well in advance.
Improve Your Credit Profile A strong credit score is key to accessing the best mortgage rates. Pay down debts, avoid missed payments, and review your credit report regularly.
Consider Longer Fixed Rates If you’re uncertain about how quickly rates may fall, a 5-year fixed-rate mortgage can provide stability while still offering competitive rates.
Speak to a Mortgage Adviser - As whole-of-market mortgage advisers, Model Financial Solutions can help you access exclusive deals and provide tailored advice to suit your financial circumstances.
Stay Informed Keep an eye on economic updates, Bank of England announcements, and lender trends to make well-timed decisions.
Why Work with Model Financial Solutions?
At Model Financial Solutions, we understand that the mortgage market can feel overwhelming, especially during times of economic change. Our team of experienced mortgage specialists offers:
Whole-of-Market Access: We search the entire market to find the best mortgage rates and deals.
Tailored Advice: Whether you’re a first-time buyer, home mover, or looking to remortgage, we provide solutions that suit your unique needs.
Expertise for Complex Situations: From self-employed applicants to buy-to-let landlords, we have the expertise to navigate complex mortgage cases.
Conclusion: Stay Ahead of the Market in 2025
While mortgage rates are unlikely to return to the record lows seen in 2020, forecasts suggest that borrowers may see some relief in 2025 as the base rate eases and lender competition increases. By planning ahead, improving your financial profile, and working with a mortgage broker like Model Financial Solutions, you can position yourself to secure the most competitive rates.
Whether you’re buying, remortgaging, or investing in property, our expert advisers at Model Financial Solutions are here to help you navigate the market and make the most of future opportunities.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.
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