08-05-2025
Boost for homeowners as mortgage rates on track to hit 3.5pc
Homebuyers could see mortgage rates as low as 3.5pc by the end of the year as lenders respond to Bank of England interest rate cuts, brokers have said.
Economists predict the Bank will slash the base rate by 0.25 percentage points to 4.25pc, and will gradually reduce rates to 3.5pc by the end of the year.
It means homeowners remortgaging this year could see average rates 'somewhere in the region of 4pc', with some brokers predicting rates could fall even further.
Lenders typically price in forecasts for the base rate, so Thursday's decision is not expected to affect mortgages in the near future.
However, this is the first Bank of England meeting since Donald Trump's 'Liberation Day' tariffs caused a steep drop in interest rate swaps – the main pricing mechanism for fixed-rate mortgages.
Brokers are hopeful some lenders will offer rates below 3.5pc.
Mike Staton, of Staton Mortgages, said: 'I am confident that we will see fixed rate options lower than that figure.'
But Mr Statton warned low rates were typically accompanied by high fees, such as Halifax's low rate currently, which has an attached fee of £1,495.
Wealth manager, Riz Malik, of R3 Wealth, said: 'Fixed-rate mortgages under 3.5pc are certainly achievable by the end of the year, especially for those borrowing under 65pc of the value of their property, if rate cuts meet market expectations.'
It comes as Britain's biggest building society cut its mortgage rates for the second time in two weeks ahead of the Bank Rate decision.
Nationwide on Thursday announced rate cuts of up to 0.3 percentage points, while Halifax reduced rates by up to 0.18 percentage points. TSB and Virgin Money also lowered deals ahead of the vote.
Robert Gardener, chief economist at Nationwide, warned that low rates were typically paired with large fees or would require large deposits.
He added: 'Markets are expecting policymakers to lower the Bank Rate further and faster than a few months ago. However, you've got a lot going on in the global economy that could change.'
The average rate for a two-year fix is currently 5.14pc, according to analyst Moneyfacts. Five-year fixes average at 5.08pc.
Andrew Goodwin, of Oxford Economics, said: 'We are expecting mortgage rates to come down to somewhere in the region of 4pc by the end of next month.
'These are quite a lot cheaper than they were six months ago, but still a lot dearer than they were before the rate-hiking cycle of 2022.'
Mortgage rates surged from 3.1pc to 5.1pc between January and October 2022 as Liz Truss' infamous 'mini-Budget' sent markets into chaos.
Those coming to the end of mortgages fixed before that period still face a 'large increase in debt servicing costs', Mr Goodwin warned.
Rachel Springall, of said: 'Two-year fixed rates were at their lowest point since September 2022, which was a few weeks prior to the notorious fiscal announcement, or 'mini-Budget', that saw markets panic and mortgage rates skyrocket.'
There is potential for rates to fall even further, with HSBC predicting the base rate could fall to 3pc by August next year.
However, Simon Pittaway, of the Resolution Foundation, said: 'Are we going to get to the old world of mortgage rates starting with a number one? Not in anyone's central forecasts.
'We're in a completely different world. Unless something massive happens, no one expects mortgage rates to go back to what they were then.'
