May 2, 2025
As of May 2025, the UK mortgage market is showing signs of cautious optimism following a series of base rate cuts by the Bank of England. For estate agents and homebuyers alike, understanding how these changes affect borrowing is essential — especially as the market begins to regain stability after two years of turbulance.
Interest Rates: What’s Happening?
Earlier this month, the Bank of England reduced the base rate from 4.5% to 4.25%, marking the third cut in 2025 so far. This decision was made in response to cooling inflation and a desire to stimulate consumer spending and housing activity.
While inflation crept back up to 3.5% in April, it remains significantly below the peaks seen in 2023 and early 2024. Economists are forecasting further reductions in the base rate later this year, potentially reaching 3.0% by early 2026 — if inflation continues to trend downward and the economy remains resilient.
What Are the Current UK Mortgage Rates?
The recent base rate reduction has been followed by lenders gradually adjusting their mortgage offerings. While rates have not fallen dramatically, there is now more competition — particularly in fixed-rate deals. Here’s a general overview:
Fixed-Rate Mortgage Averages (May 2025):
2-Year Fixed – Avg: 4.60%, best deals as low as 3.72%
5-Year Fixed – Avg: 4.57%, best deals around 3.78%
10-Year Fixed – Starting from 4.39% with select lenders
Tracker Mortgages:
Some lenders have begun offering base rate trackers again, with introductory rates around 4.50%, offering potential savings if further cuts are introduced.
Lender Activity:
High street banks like Lloyds, NatWest, and HSBC are actively refining their fixed-rate products, especially for buyers with 25–40% deposits. Meanwhile, niche lenders are offering competitive remortgage options for those seeking to lock in before further market shifts.
What Does This Mean for Buyers and Sellers?
For Buyers:
Affordability is improving slightly — monthly repayments are lower than last year, particularly for buyers with larger deposits.
More choice in mortgage products as lenders become more competitive.
Opportunity to fix at below-peak rates, avoiding potential volatility later this year.
For Sellers:
Slight increase in buyer confidence, particularly among first-time buyers re-entering the market.
Faster decision-making from buyers who are keen to secure lower rates now, before lenders adjust again.
Here’s how we can add value right now:
Encourage pre-approvals: Buyers should get a mortgage agreement in principle before making offers to speed up transactions.
Partner with mortgage brokers: A broker can help buyers navigate the increasing number of deals and find the best fit.
Keep clients informed: Rate changes happen quickly — regular updates can help reassure nervous buyers and motivate hesitant sellers.
Looking Ahead
The outlook remains cautiously positive. If inflation continues to ease and economic growth remains steady, the Bank of England is expected to continue a slow downward adjustment of rates. However, any global shocks — such as trade tensions or energy price hikes — could disrupt this trajectory.