Mortgage Rates Predicted to Carry on Falling in 2025.

Mortgage rates are anticipated to continue their decline, with forecasts suggesting another base rate cut in November. Here’s our most recent outlook on mortgage and base rates.

UK mortgage rate forecast for November 2024

Mortgage rates are on a downward trend and experts suggest they could decrease even more. With another base rate cut anticipated in November and ongoing competition among lenders, some fixed-rate mortgages have reached their lowest levels in two years. What’s even more promising for borrowers is the growing belief that rates could keep falling for the remainder of the year. The Bank of England's decision to lower the base rate in August was seen as a bold move, and it has already positively impacted mortgage rates, particularly for those lenders operating in the swap market. This market is crucial as it determines the costs for lenders offering fixed-rate mortgages. This competitive environment is likely to result in further rate cuts, especially in the five-year mortgage sector, where we are already noticing several rates below 4%.

If you’re looking for the most competitive mortgage for your unique circumstances, Unbiased can quickly connect you to a qualified mortgage broker who can help.

Fixed-rate mortgages head down

Fixed mortgage rates experienced a decline throughout August, mirroring the trend observed in July and aligning with predictions made last month. According to Rightmove, the average five-year fixed mortgage rate was 4.74% as of August 28, a significant drop from the 5.02% it began the year with.

The interest rates on new fixed mortgage deals have gone up in recent years due to rising interest rates aimed at curbing the rapid price increases triggered by the Covid pandemic and Russia's invasion of Ukraine.

Similarly, two-year fixed-rate mortgages have also seen a decrease, with the average rate now at 5.10%, down from 5.43% at the start of 2024. At first glance, this seems like great news for anyone considering a fixed-rate mortgage. In fact, typical rates across all loan-to-value ratios have decreased over the past couple of months. However, a closer look at the data indicates that not all borrowers are benefiting equally from these recent reductions.

Those with larger deposits or more equity in their homes have emerged as the clear winners, while first-time buyers are often left at a disadvantage. For instance, if you have a 40% deposit or equity, allowing you to secure a 60% loan-to-value mortgage, the average rate on two-year fixed-rate mortgages has dropped from 4.82% at the beginning of 2024 to 4.38%, a reduction of 0.44 percentage points. In contrast, for those with a smaller 5% deposit needing a 95% LTV mortgage, the current average two-year fixed-rate stands at 5.83%, which is slightly higher than the 5.81% average recorded at the year's start.

Tracker mortgage rates and SVRs to fall

Many individuals paying their lender’s standard variable rate (SVR) or those with a tracker mortgage can relate to the challenges faced by first-time buyers. However, on August 1, the long wait of over four years for a favourable shift in the base rate finally came to an end. Five members of the Bank of England's policymaking committee voted to reduce the rate from 5.25% to 5.00%, outvoting the four who wanted to keep it the same.

This marked the first decrease in the base rate since March 2020, leading to a drop in many mortgage rates. According to the investment platform Hargreaves Lansdown, approximately half a million mortgage holders can now anticipate saving over £330 annually on their payments. For those with a tracker mortgage, which adjusts in accordance with the base rate, lower repayments are almost certainly on the horizon.

However, the situation is less clear for borrowers on an SVR, where lenders have more flexibility. Since the announcement of the base rate change, numerous lenders have indicated that their SVR will decrease. This includes institutions like Bank of Scotland, Barclays, Clydesdale Bank, Co-op Bank, Coventry Building Society, Halifax, Lloyds, Nationwide, Principality Building Society, Santander, Scottish Widows, TSB, Virgin Money, West Brom Building Society, Yorkshire Bank, and Yorkshire Building Society. However, not all lenders are reducing their SVR by the full 0.25 percentage point that corresponds with the base rate drop, and many have yet to announce their plans.

November  base rate cut

Attention has shifted to the potential for a decrease in the base rate. There are three upcoming announcements regarding the base rate before the year concludes: on September 19, November 7, and December 19. Currently, a change in September is not anticipated.

The prevailing thought is that the recent economic indicators do not yet support another reduction. Wage growth data has proven to be more resilient than expected, and shortly after, it was confirmed that inflation ticked up in July, moving from the 2% target to 2.2%. Importantly, this increase was anticipated, and the actual figure was lower than expected, as was the closely monitored services inflation.

The general agreement is that this will give the Bank of England confidence that inflation remains manageable. Consequently, it is believed that there may be room for one or possibly two more base rate cuts before the year ends, but not until November. Experts suggest that this scenario could allow mortgage rates to continue decreasing in the upcoming months. However, considering the recent rapid decline in rates, the pace of these reductions might begin to slow down.

Related: Mortgage Calculator