Following four cuts to the Bank of England’s benchmark Bank Rate since August 2024, the outlook for borrowers is more positive than it’s been for a few years. But there could still be bumps in the road ahead.

Inflation edged down to 2.6% in the year to March, from 2.8% in February. But the Bank of England’s rate-setting Monetary Policy Committee (MPC) has expressed fears that turbulence in the world economy, combined with soon-to-be rising household bills including council tax and energy, could push up inflation in the coming months. 

This would mean that interest rates won’t reduce as quickly as had previously been expected – or could even rise again. The MPC uses Bank Rate as a tool to control rising inflation.

So what does this mean for mortgage rates, and the housing market for the remainder of 2025? We’ve rounded up predictions from a range of experts.

What will happen to Bank Rate in 2025?

The Bank of England cut the Bank Rate down to 4.25% in May. It followed a reduction from 4.75% to 4.5% in February 2025 and two quarter-percentage point rate cuts from 5.25% in 2024.

The next MPC decision on the Bank Rate will be on 19 June.

While the consensus among experts remains that Bank Rate will continue to fall during 2025, any future increases in the rate of inflation, and higher-than-expected wage growth, could put the brakes on interest rate reductions. 

Myron Jobson, senior personal finance analyst at investment platform Interactive Investor, says: “The real litmus test for inflation will take place in the coming months, following rises in utility and other household bills in April and once the impact of President Donald Trump’s tariff wars starts to filter through.

“The dip in inflation in February was largely down to the discounting of clothing items which is a volatile component. It reflects bumpier progress on inflation’s path back to the Bank of England’s 2%, with the inflation landscape becoming increasingly uncertain as various economic factors begin to take effect.”

The Office for Budget Responsibility (OBR) forecasts that inflation will peak at 3.8% in July 2025.

Mortgage broker Nick Mendes, at John Charcol, also comments: “The Bank of England’s decision to cut the Bank Rate by 0.25 percentage points in May reflects a pragmatic response to the shifting economic landscape. Recent data has pointed to softening momentum both at home and abroad, and there is little doubt that ongoing global uncertainty, particularly around trade, has started to weigh more heavily on the outlook. With inflation coming down faster than expected there is a clear case for acting now rather than risking a more abrupt response later.”

Nathaniel Casey, investment strategist at wealth management firm Evelyn Partners, adds: ‘With rising energy price caps expected over the coming quarters, the Bank will have to balance the risks of low growth and above-target inflation. But in our view, the growth risks outweigh the inflation risks, and we expect the Bank will cautiously continue its interest rate cutting cycle over the coming quarters.”

What will happen to fixed mortgage rates in 2025?

Jonathan Bone, head of mortgages at online broker Better.co.uk, says: “Many people had predicted that Bank Rate would drop below 4% by the end of 2025, but unless inflation drops considerably, confidence in this prediction could start to wane. It means in turn that fixed mortgage rates may take longer to fall.”

Katherine Stagg at broker Stagg Mortgages, agrees: “While interest rates were cut in May, if inflation remains stubborn the Bank Rate may not fall as sharply as experts were predicting back in the summer of 2024.

“It means while fixed mortgage rates should ease downwards in 2025, which is good news for borrowers, rates probably won’t fall as sharply as some had hoped.”

Should borrowers take a two-year or five-year fixed rate mortgage?

When it comes to a choice about fixed-rate mortgage deals, taking a two-year or five-year fixed-rate mortgage will usually come down to your personal financial situation. 

At the time of writing (May 2025), the best two- and five-year fixed rates (typically available for borrowers with at least 40% deposit or equity in their home – 60% loan to value) are about the same. It means the choice over what fixed rate term to choose is likely to come down to your personal situation, such as whether you may want to move house in the short term, or if you can take a bit more risk that rates could fall by 2027. Conversely, if you’re not planning to move house or change your situation, and you’re looking for longer-term payment stability then a five-year deal is likely to be an attractive option.

In a falling interest rate environment, more borrowers may look to keep some flexibility in their borrowing by opting for a shorter fix.

David Hollingworth, associate director at broker L&C Mortgages, says that more borrowers have been choosing two-year over five-year fixed rates in the hope they can review their deal again sooner and – hopefully – take advantage of lower rates by 2027.

“A short-term fix offers the flexibility to get an even better deal more quickly,” he says. “Lenders are competing hard and will continue to do so into the summer months, which is good news for fixed rates.”

Mark Harris, chief executive at mortgage broker SPF Private Clients says: “For those not sure whether to fix for two or five years, a two-year fix looks the right call in the current environment. But for those who can’t afford to be wrong, a five-year fix, or even longer, is worth considering for payment stability.”

Should I take a tracker or fixed-rate mortgage in 2025?

In the wake of a falling Bank Rate and the trajectory for mortgage rates looking clearer, tracker rate deals are beginning to look more attractive than they have for many years.

L&C Mortgages’ Hollingworth says: “As interest rates come down, we may see more borrowers considering whether a tracker deal could carry merit, although the more gradual cuts to Bank Rate, which we’re likely to see, will probably mean fixed rates remain the dominant choice for borrowers.”

Harris, at SPF Private Clients adds: “Trackers appeal to those looking for flexibility, enabling borrowers to drop into a fixed rate without penalty on some deals, when they feel the time is right to do so. That said, those on a tight budget should still consider fixing now as that will give them peace of mind and protect them from any upsets, which they can ill-afford.

He adds that there are also some flexible fixed rate deals worth considering, such as Virgin’s five-year fix which only has two years of early repayment charges: “This gives the borrower the affordability and security benefits of the longer term but also the flexibility to exit into a hopefully better rate with no penalties after two years.”

Mendes at John Charcol says: “While tracker mortgages haven’t offered particularly good value in recent months, that picture is likely to shift this year as the market is showing greater confidence that interest rates have now peaked and will fall further in the coming months.

“That said, while there’s potential for savings with a tracker, if rate cuts arrive sooner than expected, fixed rates are currently offering a very attractive mix of value and stability.

“For most borrowers it means a fixed-rate deal will make more sense when you consider overall cost, plus the reassurance of knowing what you’ll be paying each month.”

Housing market outlook 2025

While house prices proved resilient in 2024, rising between 1.4% and 4.8% annually, according to the various indices and data from the Land Registry, Halifax, Nationwide and Rightmove, the outlook for 2025 is more uncertain.

The reduction in the stamp duty nil-rate bands in England and Northern Ireland from April 2025 is likely to have an effect on buyer demand and sales volumes which, in turn, may put the brakes on any significant price rises in the coming months.

But further cuts to interest rates, which are predicted for 2025, could also act as a counter to higher stamp duty bills for first-time buyers and movers, which could buoy the market.

Here’s our rundown of what the property and mortgage experts are predicting for the housing market:

Halifax

The UK’s biggest lender says the predicted reductions to interest rates in 2025 are expected to continue supporting demand. This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago.

The lender is predicting annual price inflation between 0% and 3% nationally for 2025.

Nationwide building society

Robert Gardner, Nationwide’s chief economist, has predicted house prices could rise by between 2% and 4% in 2025. While the changes to stamp duty caused a jump in transactions in the first three months of 2025, Gardener expects there will be a corresponding ‘period of weakness’ in the market during the six months after the April changes come into force.

Rightmove

Experts at the property portal giant have predicted that new seller asking prices will rise by 4% in 2025, as mortgage rate reductions improve affordability.

Rightmove’s mortgage expert Matt Smith says: “The much-anticipated second rate cut of the year has arrived (May 2025), and with some lenders having taken their time to pass on the benefits of the expected Bank Rate cut, I think we may now see further reductions in the coming days and weeks. A fresh round of mortgage rate reductions could be a boost for buyer demand as this year’s Spring selling season approaches its end.”

Zoopla

Rightmove competitor Zoopla predicted average house prices will rise by 2% to 2.5% in 2025 and by 7.5% over the next three years. It says it expects the number of property sales to also increase, by 5% in 2025, to a total of 1.15 million transactions.

Richard Donnell at Zoopla says: “We expect the growth in sales agreed to continue rising at a steady pace over 2025 as more sellers, most of whom are also buyers, enter the market in the coming months. 

“House price growth is set to moderate further as supply grows and the extra costs of stamp duty in England feed through into house prices.”

What affects mortgage rates?

How to find the best mortgage rate

Getting a good mortgage rate can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:

• keep your eye on rates and act early. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate ahead of time. Typically lenders will allow you to lock in a new mortgage deal up to six months before your existing rate comes to an end
• check your credit score. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness. In general, the higher your credit score the better your rate will be. Take steps to strengthen your credit score to ensure you’re offered the best possible mortgage rates
• increase your savings pot. By accumulating a larger deposit towards a home purchase, or using spare cash to overpay on an existing mortgage, you can lower your overall loan to value ratio (LTV) on a new mortgage deal which could help you secure a lower mortgage rate
• compare lenders and deals. Consider mortgage options from as many lenders as possible and use a mortgage broker, who can quickly and easily scour the market to find the best deal for you
• consider different mortgage terms. A five-year fixed rate could have a lower interest rate than a two-year deal, for example. But look out for the arrangement fees as these can bump up the total cost of a deal
• speak to your current lender. It is worth comparing product transfer deals (the rate and product fees) with the prevailing deals in the open market to see if you might save money by sticking with your existing lender.

Mortgage rate predictions for the next five years

Predicting mortgage rates for the next five years is a tall order, especially considering the uncertainty seen over the past few years with record high inflation – more than 11% in October 2022 – stagnant growth in the economy, and huge cost of living pressures for households.

While some of these issues may now be improving, albeit gradually, plus interest rates are starting to fall which is good news for borrowers, there is likely to be volatility ahead, both economically and politically. How far, and how quickly, mortgage rates will come down remains uncertain.