Mortgage rates have continued to tumble, despite the Bank of England keeping interest rates on hold at its latest meeting.
Barclays cut some of its rates today (25 June), including reducing a two-year mortgage deal from 3.96% to 3.88%. TSB has also trimmed rates by up to 0.3%.
Last week, the Bank voted to hold interest rates at their current level of 4.25%.
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According to Moneyfacts, the average two-year fixed mortgage deal has dropped from 5.93% a year ago to 5.12% in June 2025. Five-year deals have fallen from 5.5% to 5.09% over the same period.
Average two-year fixed deals are now at their lowest point since the start of September 2022, before the disastrous “mini-Budget” was announced under Liz Truss’s leadership.
The fall in mortgage rates comes as the Financial Conduct Authority (FCA) launches a discussion paper on the future of the mortgage market.
The regulator says that first-time buyers, the self-employed and people borrowing into retirement could benefit from changes to mortgage rules.
It notes that the mortgage market has changed considerably over recent years. First-time buyers are older and borrowing for longer. The FCA’s data shows that last year, 68% of first-time buyers borrowed for terms of 30 years or longer.
One option is to bring back interest-only mortgages; the FCA says: “We would like views on whether our rules could better support more interest-only mortgages”. Making equity release products more flexible could also be on the cards.
The regulator will report back later this year or next year about whether any mortgage changes will be implemented.
For now, homeowners and first-time buyers will be pleased to note that mortgage rates are on a downward trend, with the “Trump tariffs” triggering a flurry of cuts from mortgage lenders earlier this year.
Dozens of mortgage deals are now below 4%, including from Nationwide, HSBC, Barclays, Santander and Coventry Building Society.
But will mortgage rates drop lower this year? There are several economic headwinds to be wary of.
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?
Barclays has reduced its mortgage rates, with prices now starting at 3.88%. The purchase-only premier two-year fixed at 60% loan-to-value (LTV) with a product fee of £899 has been cut from 3.96% to 3.88%.
It has also trimmed the rate on its two-year fixed deal at 60% LTV with a product fee of £899 from 3.97% to 3.89%.
The lender has also lowered some of its remortgage deals.
Meanwhile, TSB’s shared equity and shared ownership fixed first-time buyer and home move rates have been cut up as much as 0.3%. This applies to both two-year and five-year deals.
Other lenders making mortgage rate cuts this week include Coventry for Intermediaries and Accord Mortgages.
In recent months, a large number of mortgage lenders have cut their rates, including Nationwide, Santander, Coventry Building Society, Skipton Building Society, Clydesdale Bank, the Co-operative Bank, Bank of Ireland, Metro Bank and Newcastle Building Society.
According to the analyst Defaqto, there were 80 fixed-rate mortgage deals with an interest rate of less than 4% available on 25 June. This is a big increase from the 26 mortgage products priced below 4% on 23 April.
In other mortgage news, Nationwide is increasing the maximum loan-to-value (LTV) for those looking to purchase a new-build house to 95%, and 85% for those buying new-build flats, while offering loans worth up to six times’ income.
The building society said this would help support first-time buyers, housebuilders and the government’s housing ambitions.
What is the forecast for mortgage rates?
In terms of interest rate expectations, most economists are expecting at least one more rate cut this year, possibly in August. Some are forecasting two further cuts this year, or even three.
The Bank’s Monetary Policy Committee will meet four more times this year to set the base rate (August, September, November and December).
Any cuts – or expected cuts – are usually favourable for mortgage rates.
However, there is no guarantee that the Bank will reduce interest rates - these are merely predictions - and it’s also worth remembering that mortgage lenders consider multiple factors when setting their rates, including their service levels, swap rates and overall market conditions.
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.
According to Sarah Coles, head of personal finance at Hargreaves Lansdown, homeowners and first-time buyers should get used to “uncertainty” in the mortgage market, as some lenders have increased their rates, some have reduced them and others have done a combination of both.
“You’d be forgiven for thinking that the Bank of England holding rates [last week] might bring some stability, but while that’s true for tracker rates, fixed-rate deals are another matter entirely.
“They’re facing a strange combination of factors, with expected rate cuts pointing to a future of lower rates, and rising bond yields raising the cost of fixed deals and pushing rates up. Neither of these things look set to change in a hurry, so we may need to get used to uncertainty for a while.”
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, the lowest fixed mortgages typically charge upfront fees of around £1,000, or even up to £2,000.
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?
David Hollingworth, associate director at the broker 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.”
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 7.48%, according to Moneyfacts. The average two-year tracker costs 4.91%.
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.
Rachel Springall, finance expert 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 25 June was 4.98% - the first time it has dropped below 5% since September 2022 - while the average five-year buy-to-let fix was 5.26%.
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 a record 4,144 buy-to-let mortgage products available.
Landlords will be hoping for a further fall in mortgage rates this year, to help offset the 5% stamp duty surcharge and less generous mortgage interest tax relief.
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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