The average two-year fixed mortgage rate has fallen to its lowest point since the start of September 2022, before the disastrous “mini-Budget” was announced.
A series of interest rate cuts has lowered the cost of mortgage deals, bringing good news to first-time buyers and homeowners looking to remortgage.
Last week, the Bank of England reduced the base rate from 4.5% to 4.25% – and there could be further rate cuts to come later this year.
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According to Moneyfacts, the average two-year fixed mortgage deal has dropped from 5.91% a year ago to 5.18% in May 2025. Five-year deals have fallen from 5.48% to 5.10% over the same period.
Mortgage rates have been on a downward trend this year, with the “Trump tariffs” triggering further cuts from mortgage lenders in recent months.
Dozens of mortgage deals are now below 4%, including from Nationwide, HSBC, Barclays, Santander and Coventry Building Society.
The International Monetary Fund (IMF) expects the Bank of England to reduce interest rates two more times this year, despite the UK grappling with higher-than-expected inflation.
However, there is still some uncertainty, not just on what Trump will do (will he raise, cut or pause tariffs in the coming weeks?), but also in terms of economic headwinds in the UK.
Tax rises such as the National Insurance increase for employers, inflationary concerns and GDP figures will all play a part in what happens to swap rates – which influence the price of fixed-rate mortgage deals – and what the central bank decides in terms of changing interest rates.
We take a closer look at the outlook for UK mortgage rates this year.
Which mortgage lenders are cutting rates?
Nationwide cut rates for existing customers switching to a new deal or new customers remortgaging by up to 0.22 percentage points on 8 May.
Rates now start at 3.84% for new customers looking to remortgage (with a £1,499 fee), while switcher rates for existing customers also start from 3.84% but with a £999 fee.
Last month, Santander trimmed mortgage rates by up to 0.21 points and brought back some sub-4% deals due to “the recent reduction in swap rates”.
Barclays also cut some of its rates following the Trump tariffs turmoil. On 11 April, the bank reduced the rates on certain fixed deals to 3.99% for borrowers with a 60% loan-to-value (LTV). An £899 fee applies.
Coventry Building Society cut its two-year fixed rate deal to 3.89%. Meanwhile, TSB lowered some of its rates on 9 April. Its two-year fixed deal for first-time buyers and home movers with a 75-85% LTV dropped by 0.25 points.
Skipton Building Society, Clydesdale Bank, the Co-operative Bank, Bank of Ireland, Metro Bank and Newcastle Building Society have also made rate cuts during the past few months.
According to the analyst Defaqto, there are 156 fixed-rate mortgage deals with an interest rate of less than 4% available today (14 May). This is a big increase from the 26 mortgage products priced below 4% on 23 April.
What is the forecast for mortgage rates?
According to Moneyfacts, there was a huge amount of mortgage cutting last month. Rachel Springall, finance expert at Moneyfacts, comments: “Such vigorous activity led to notable cuts to the overall average two- and five-year fixed mortgage rates, seeing the biggest monthly fall to the two-year fixed rate in over six months.
“Borrowers looking for a new deal may also be pleased to see the average two-year fixed rate has reached a notable milestone, falling to its lowest point recorded since the start of September 2022, before the notorious ‘mini-Budget’.”
In terms of the outlook for the rest of the year, the IMF previously predicted that we’ll see three more interest rate cuts from the Bank of England – but as one has now happened (on 8 May), that leaves two more to go.
The Bank’s Monetary Policy Committee will meet five more times this year to set the base rate (June, August, September, November and December).
The consultancy Capital Economics says the US tariffs war has “raised the chances that the Bank of England will cut interest rates from 4.50% to 3.75% this year, rather than to our forecast of 4%”.
Any cuts – or expected cuts – are usually favourable for mortgage rates.
David Hollingworth, associate director at the broker L&C Mortgages, says it was “no surprise” that the base rate was cut by 0.25% last week, but that a lot of uncertainty remains.
He comments: “The cut was already priced in and although we’d hope to see mortgage lenders continue to make improvements, the base rate fall won’t necessarily result in major cuts.
“Borrowers holding off in the hope of further drops may want to think about how quickly things can change. Just as rates have dipped again there’s no knowing what may be round the corner.”
Laith Khalaf, head of investment analysis at AJ Bell, says the outlook for mortgage rates depends on the final implementation of Trump’s tariffs as well as the state of the UK economy.
“Lenders may be looking at the economic picture, in particular the potential for unemployment to rise, and think this is no time to be heroic by slashing rates. Unfortunately for mortgage borrowers, guessing the future direction of the mortgage market right now is like a high-stakes game of blind man’s buff,” he warns.
Bear in mind that the mortgage rate is just one aspect of a deal. Borrowers need to watch out for extra mortgage costs as some deals have high fees attached that could offset any savings compared with other deals with higher rates but lower charges.
According to Moneyfacts, average product fees on a fixed-rate mortgage deal (not including no-fee products) have risen to £1,129 – an increase of £89 since March 2020.
In happier news, Moneyfacts has also revealed that the choice of low-deposit mortgages has hit a 17-year high.
The data provider says the number of deals at the 95% loan-to-value tier has reached 462. The availability of deals at the 90% loan-to-value tier has risen to 876, also at its highest point in 17 years.
Should you fix your mortgage?
If the last two years of rises and falls have told us anything, it's that predicting falls in mortgage rates is not an exact science. So, if you have one of the estimated 1.6 million fixed mortgage rates that is expiring this year, should you opt for another fixed deal?
Hollingworth, of L&C Mortgages, says homeowners should start reviewing rates several months before their fix finishes. Locking in a rate now will offer protection against any future increases, and if rates fall before your current fix ends, you can switch onto the lower rate.
However, do double-check the time window for locking in a new deal, as some lenders have reduced theirs to just three or four months.
Fixing your mortgage will provide peace of mind. However, if you're happy to take a gamble, and believe that interest rates will fall over the duration of your next mortgage deal, you could consider a base rate tracker.
Nicholas Mendes, mortgage technical manager at the broker John Charcol, comments: “The key concern for many borrowers is affordability. Those who locked in rates at 1-2% several years ago are now facing remortgage offers of around 4-5%, which could add hundreds of pounds to their monthly repayments.
“Some may choose to fix their rate now for certainty, while others may opt for a variable or tracker mortgage in the hope that rates fall later in the year. There’s also the option of shorter 18 months to two-year fixed deals, allowing borrowers to reassess their options once rates have declined further.”
Three-year fixed deals are also available. Last month, L&C Mortgages launched a range of three-year remortgage rates, starting from 4.02%.
Katie Brain, banking expert at Defaqto, points out that there is currently only a small gap between two and five-year mortgage rates, so “we could start to see more homeowners taking out longer term fixed mortgages”.
She adds: “When rates increased, many people were reluctant to fix for too long. Now we’re seeing those rates come down, those that want the financial stability of knowing their mortgage payment is fixed for a prolonged length of time may start to reconsider those five-year products or even longer.”
What about variable mortgage rates?
About 1.1 million homeowners are on variable-rate mortgages, which are linked to the Bank of England’s base rate, according to UK Finance. This includes tracker deals and standard variable rates (SVRs).
The average SVR is an eye-watering 7.58%, according to Moneyfacts. The average two-year tracker costs 4.95%.
Those on a high SVR would be wise to switch onto a fixed rate now. Even if fixed rates fall later this year, the money they save from getting rid of their expensive SVR earlier could make it worth it.
Springall at Moneyfacts says: “It’s essential for borrowers not to delay finding a new deal, particularly if they are sitting on an expensive SVR.
“However, with the lowest rate mortgages grabbing the headlines, it’s vital borrowers seek advice to find the most appropriate package for them, and not just be swayed by the initial rate.”
What about buy-to-let rates?
According to Moneyfacts, the average two-year buy-to-let mortgage rate on 12 May was 5.03%, while the average five-year buy-to-let fix was 5.33%.
These rates seem quite competitive compared to how high they have been over the past few years. Buy-to-let mortgage rates were pushing 7% in the summer of 2023.
Buy-to-let investors also have greater choice, with some 4,145 buy-to-let mortgage products available.
Landlords will be hoping for a fall in mortgage rates this year, to help offset the 5% stamp duty surcharge and less generous mortgage interest tax relief.
A record number of previously-rented homes are being listed for sale, as financial strain pushes landlords to sell up.
Mortgage support available
Mortgage rates are much higher than when many people would have last remortgaged. Millions of homeowners will be coming off rates as low as 1% or 2%.
If you’re struggling to make your mortgage repayments, the good news is that lenders representing 90% of the mortgage market have signed up to the government’s mortgage charter. They include the big banks like Halifax, HSBC and Santander and building societies like Nationwide, Leeds and Skipton.
The charter is a series of support measures intended to help those in difficulty. Borrowers will be able to make a temporary change to their mortgage for six months to give them some breathing space, such as switching to interest-only payments or extending their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within six months by contacting their lender.
About 1.4 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to the City watchdog.
Meanwhile, there is a 12-month delay before repossession proceedings can start against those who have missed payments. Regardless of whether your lender has signed up to the charter, all lenders also have a range of measures in place for customers experiencing difficulties.
Should I overpay my mortgage?
If you’ve got some spare cash and you're on a low rate, overpaying your mortgage can be a good way to protect yourself before your mortgage deal expires and you have to remortgage at a higher rate.
Our mortgage overpayment calculator shows how your monthly repayments will change and help you decide if it is worth it.
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