As part of our ongoing commitment to provide you with everything you need to know about the UK property market, we’re exploring any changes to current UK mortgage rates and what that means for homebuyers.
The Bank of England’s base rate is now 4.25% (down from 4.5%), its lowest point since March 2023. This represents the fourth cut since August 2024, with the last cut occurring in February 2025.
As you’d expect, this shift has impacted both mortgage and savings rates. Lenders have passed this cut on to consumers, meaning largely more affordable mortgages across the board. This is fantastic news for prospective homebuyers, who now have a fantastic opportunity to get a better deal on a brand-new home.
Analysts suggest that there’ll be more cuts throughout the year, with some even suggesting it’ll drop below 4% by the end of 2025. The Bank obviously hasn’t confirmed this, but has implied that any cuts will be done gradually.
What does this mean for different mortgage types?
If you have a fixed mortgage, there’ll be no change until the end of your fixed term. The rate of new fixes may change slightly but due to it being expected, most lenders factored it in anyway.
If you’re on a tracker mortgage, the rate will drop by 0.25% points. A variable mortgage will likely drop by a similar amount, but it doesn’t necessarily have to be that exact amount.
The reduction of 0.25% works out to around £180 less a year per £100,000 of the mortgage.
Will there be another cut?
As we mentioned above, many experts believe another cut will occur soon, with some even suggesting as early as the summer.
This is mostly because the overall inflation rate is expected to remain close to the Bank’s overall target.
If inflation continues to ease and the economy continues to show signs of weakening, it’s not impossible that the base rate could fall as low as 3.5% by the end of the year - something that several markets are already factoring into their pricing.
How else is the UK mortgage market changing?
Another major change that we’re seeing is that lenders are typically loosening their affordability criteria after recommendations from regulators.
It’s expected that over the coming months, more people will be able to buy a home that was previously well out of their price range.
Santander was one of the first major lenders to loosen their rules, allowing their customers to borrow more, and it’s expected that many other lenders will follow suit.
With buying a property increasingly difficult for most people, especially with rising property prices, cost of living issues and higher interest rates, mortgage brokers are hoping that these changes will make home ownership significantly more accessible.
As always, relaxing the rules of borrowing can bring with it certain risks, which regulators will likely be watching over the rest of the year.
