Last year saw some positive shifts in the UK economy. Inflation finally reached its target of 2%, interest rates started to decline, and mortgage rates edged back toward more reasonable figures. There were, however, some actions that weren’t anticipated, like the hold on interest rates made by the Bank of England in the December update.
Let’s explore this update further and find out what that means for you and your mortgage in 2025.
The Latest Actions from the Bank of England Explained
The latest action the Bank of England brought in the December meeting was a hold on interest rates at 4.75%. This came after a 0% growth between October and December, meaning that until the next BoE meeting in February, we will likely see no further cuts to mortgage rates.
We can gauge what will happen to interest rates by keeping an eye on inflation, which started to rise again toward the end of last year, inevitably leading to the current hold on the base rate of interest.
What Impact Will This Hold Have on Mortgages?
Fixed Rate Mortgages
Any change in base rate won’t immediately affect fixed-rate monthly payments, however, due to the ongoing fluctuations in interest rates, fixed-rate mortgages are much higher than they were.
Tracker Mortgages & SVR (Standard Variable Rate) Mortgages
The impact of the base rate of interest immediately impacts those on tracker and SVR mortgages. If industry predictions are correct and we are due to see more rate cuts into 2025, then those on tracker and SVR mortgages will likely see the most benefit.
Are Mortgage Rates Expected to Drop Further This Year?
We will not see any interest rate cuts in January until we have the next Bank of England meeting on 6th February, and until then, we will not know for sure which direction rates will travel. It is, however, expected that rates will be cut further this year. Goldman Sachs analysts announced their prediction of a cut as low as 2.75% for interest rates by the end of 2025, while Santander’s experts predict a fall to 3.75%, and Barclay’s predicting a drop of 3.5%.
Have Lenders Started to Decrease Mortgage Rates?
Yes, there have been several lenders that have already started to reduce their mortgage rates this month, including Halifax, HSBC, and Leeds Building Society. Halifax have cut their rates by up to 0.3% with their 3-year fixed, 60% LTV mortgage reduced to 4.41%, which is fee-free. Their fee alternative of £999 has dropped to 4.18%. HSBC has dropped its 2-year fixed by up to 0.16% and its 5-year fixed by up to 0.15%, and Leeds Building Society has reduced rates across its mortgage range by up to 0.21%.
What do the 2025 Mortgage Rate Predictions Mean for First-Time Buyers?
With the current mortgage landscape, we would advise first-time buyers to act fast so they can snap up the best rates possible, but not before they have worked out their budget. Work out how much you can borrow without overstretching yourself and remember that bigger deposits save money in the long run. It’s also important to improve your credit score where possible, as this directly affects the success of your mortgage application.
Is 2025 a Good Year to Remortgage?
When it comes to remortgaging, your personal circumstances are important to consider. In general, 2025 is looking to be more positive for interest rates, so it is a good time to remortgage. However, the below points are important to consider:
- Check your current mortgage deal’s end date and if it ends within the next 6 months then it’s a good time to start the remortgage process to save money by avoiding rolling onto expensive SVR rates.
- Compare fixed and variable rates and work out if the security of a fixed rate, which could be slightly higher than a variable rate, is better suited to you or if you would like the opportunity to take advantage of lower rates, should the base rate fall again.
- If you have already rolled over to your lender’s SVR, then review your options as soon as possible and save a significant amount of money by switching.
- Consider a mortgage broker to help guide you through the hundreds of lenders they have access to to find the best fit for you.
Need Help Navigating Interest Rates in 2025?
If you need help when it comes to finding a mortgage, or you’re struggling to keep up with higher payments, speaking to an independent mortgage advisor, such as TaylorMade, can help. We are a specialist mortgage broker in Manchester able to check hundreds of lenders, taking the stress and overwhelm out of a daunting situation.
Taylormade: Independent Mortgage Advisor in Manchester
TaylorMade has a wealth of knowledge and experience in navigating the mortgage market, meaning you can rely on us to provide advice and tips to help make each month a little easier financially. We are a specialist mortgage broker in Manchester, also operating throughout the UK, with the scope and experience to scour the market for you, taking the hard work out of a stressful situation.
So, contact TaylorMade today: we are the leading mortgage advisor in Manchester.
