Have Mortgage Rates Stopped Falling?

The last few years have been dominated by the turbulence of spiralling inflation, relentless interest rate changes, and political instability. For many homeowners and buyers, standing still felt like the only safe option. Now, as we move through 2025, there are tentative signs that we are entering a new phase of stability, balance, and perhaps even opportunity.

This doesn’t mean that all the challenges have disappeared, in fact, far from it. However, the market is starting to show signs of resilience, and conditions are shifting in a way that could benefit those looking to move, remortgage, or buy a home for the first time.

Inflation and Interest Rates

Inflation has been the central story of recent years. From the highs of double digits that squeezed household budgets and left the Bank of England with little choice but to keep raising rates, it has now fallen significantly. It did at one point look like it would reach the 2% target earlier in the year, but the last part has proved to be stubbornly sticky, due to energy costs, service sector inflation and wage growth that saw it recently climbing back to 3.8%. That’s still above where policymakers would like it, but a long way from the chaos we endured in 2023.

The Bank of England has responded by cutting the base rate five times, bringing it down to 4.0%. Whilst there were predictions that this year would see another couple of cuts, conditions and the latest data now show something quite different.

What we have learnt is that there is now no expectation of another rate cut from the Bank of England this year. In fact, any change may not come until April 2026 and then only by 0.25%. Bank Base is then expected to stay stable at or around that level for the whole of 2026, possibly beyond.

As such the products we are seeing now, with two-year fixes back in their long-term usual place of being cheaper than five-year fixes, 3.75% versus 3.94%, are about where we expect rates to stay for now.

The main reason that we could see a deviation from this is competitive pressure from lenders, and if SWAP rates behave, we will probably see some small tweaks downwards on this as lenders jockey for some kind of position.

It is likely however, that nothing much now changes until the 26th of November when the Chancellor delivers her next statement and everyone watches to see how the markets react.

Compared to the eye-watering highs of recent years, this is a meaningful improvement – and one that is beginning to bring confidence back to borrowers.

House Price Stability

For all the predictions of sharp falls, house prices have shown remarkable resilience. In 2024, average prices rose by around 2.5%, and the expectation for 2025 is a modest 1% increase. That stability, combined with softer “asking” prices from sellers, has created a more balanced market than we have seen for some time, even verging into a buyers’ market.

Looking further ahead, forecasters suggest that growth will return more strongly, with prices expected to rise by 4% in 2026 and 6% in 2027. Over the next five years, the cumulative increase could be around 24.5%.

For buyers, particularly first-time buyers, this presents an important choice. With rents continuing to rise sharply, the cost of owning versus renting is tilting back towards ownership. Acting now, while prices are flatter and mortgage rates are easing, may prove a wise move before growth resumes.

I remain of the belief that this period represents a good time to buy, with monthly mortgage payments now comparing favourably to monthly rental costs, mortgage rates steady, and lender innovation allowing more people to buy with lower deposits.

That said, who knows what is round the corner!

Lender Innovation and Competition Returns

The behaviour of lenders is always a good barometer of market health. Over the last couple of years, many were defensive, pulling products with little notice, repricing frequently, and keeping criteria tight. That stance has shifted.

We are now seeing genuine competition once again. Lenders are keen to attract borrowers, with sharper rates, more flexible affordability assessments, and a return to product innovation. From higher loan-to-value mortgages aimed at first-time buyers to specialist products for those with more complex income, the appetite to lend is back.

What has been helpful is the Government and regulators taking some of the constraints off lenders, especially where income multiples and stress testing is concerned. As a result, we are seeing borrowers now able to borrow that bit more than they may have been able to a few weeks ago.

It is always the case that many potential buyers get put off looking due to press headlines and a general thought that there is nothing available for them. This is simply not true.

Lending is available for those with small or even no deposits, to self-employed, freelance and contractors, and to those who have had the odd credit blip. There are over 90 different mortgage lenders out there, and seeing a professional broker, (hello!) may leave you feeling pleasantly surprised.

For those looking to remortgage, this is particularly positive. With so many fixed deals ending this year and next, the range of options available is expanding, giving borrowers the chance to secure better value than they might have feared just 12 months ago.

Politics and Policy

After years of instability, and I know this may seem a strange thing to say, but political life feels calmer, which amongst other things is no bad thing for the housing market. The Government has placed housing firmly on the agenda, with targets for 1.5 million new homes, planning reforms, and measures to support first-time buyers.

The Autumn Budget later this year is expected to bring further change, with speculation about tax rises and reforms to areas such as inheritance tax, landlord taxation, and stamp duty. For landlords in particular, the regulatory and tax environment remains challenging, and we can only hope that no further adjustments are made. The Private Rental Sector remains an important part of the housing market mix.

The Government’s approach, under Rachel Reeves’ economic stewardship, is cautious but pragmatic, aiming to foster growth without spooking markets.

The Global Picture

Of course, no market operates in a vacuum. Global events continue to cast their shadow, and tensions in the Middle East, the ongoing conflict in Ukraine, and the unpredictable nature of the White House all have an effect.

But the UK housing market has a track record of resilience, and so far in 2025, activity levels have held up well. Demand remains, supply remains constrained, and together these forces are helping to underpin prices.

What Does This Mean for You?

First-time buyers

If you’re renting, you’ll already know how painful monthly costs have become. Rents are rising faster than wages, and in many parts of the country they now exceed what you’d pay on a mortgage. With house prices currently flat and lenders competing harder for your business, the market is offering a window of opportunity. Deposit requirements remain a hurdle, but there are more products available for those with smaller deposits, and support from family or schemes could help bridge the gap. Importantly, waiting in the hope that prices will fall further could backfire if growth picks up again in 2026, as many forecasts suggest.

Home movers

The past couple of years have seen many would-be movers sit tight, reluctant to trade up or down in such an uncertain environment. Now, conditions are more balanced. Sellers are having to be realistic about their asking prices, while buyers have more negotiating power than during the frenzy of the pandemic years. At the same time, borrowing costs are easing, and lenders are willing to lend. If your current home no longer suits your needs, whether that’s growing space requirements, downsizing, or relocating, the remainder of the year and early 2026  – 2025 may be one of the best environments we’ve had in years to make that move without the intense competition and inflated prices of the recent past.

Remortgagers

Hundreds of thousands of fixed-rate deals are due to expire this year and next. For many, the prospect of refinancing has been daunting, given the rise in rates over the last two years. The good news is that the tide has turned. With two-year and five-year fixes now starting with a 3 once more, monthly payments for many borrowers will be less severe than feared.

The key message here is not to wait until your current deal ends. Speaking to a broker early means you can lock in rates up to six months in advance, giving certainty and with lenders fighting for market share, the choice and flexibility available is far better than it was even a year ago.

Landlords and property investors

It’s been a tough few years to be a landlord, with rising costs, more regulation, and the threat of further tax changes. The Autumn Budget may bring additional pressures, particularly around landlord taxation and stamp duty. Yet demand for rental property has never been higher, and yields in many areas are strong.

For investors who take a long-term view and manage their portfolios carefully, opportunities remain. Some landlords are selling up, which is increasing supply for buyers, but for those able to weather the policy environment, this could actually be a chance to expand portfolios at more reasonable prices. Strategic advice will be essential to navigate what comes next, and here at Coreco we have an exceptionally experienced team for that.

Summary

2025 is unlikely to be remembered as a boom year, but after the upheaval of recent times, it represents something of a reset, which in many ways is just as valuable. Mortgage rates are easing, house prices are stable, lenders are competing again, and housing policy is back on the political agenda.

This could be the time for many to make their move, and whether that’s buying for the first time, remortgaging, or taking the next step on the property ladder, we at Coreco will be here for you every step of the way.

To speak to one of our friendly, down-to-earth advisers, please call us on 020 7220 5110 or click here.