Are mortgage rates likely to go up or down in 2025?
Whether mortgage rates will go up or down in 2025 depends on a few things. While the UK economy remains on an unstable footing, there are signs that the wider picture is beginning to settle. Read on and we’ll explain how this may affect mortgage interest rates and what that means for you.
Key takeaways
Property experts and economists generally anticipate mortgage rates will fall gradually during 2025, but opinion is split as to exactly when and by how much they'll drop
The Bank of England base rate is a key indicator for the direction of interest rates on mortgages and affects the rates offered by lenders
The scope for cuts to rates comes amid signs that runaway inflation could finally have been curbed, but still remains above the government's target of 2%
What factors affect interest rates?
Interest rates rise and fall depending on a number of different factors. Eight times a year, the Bank of England’s Monetary Policy Committee (MPC) meets to discuss whether interest rates should rise, fall or stay the same.
These rates then feed into the mortgage market, with lenders varying the rates they offer based on the MPC’s decision.
At the moment, the key factor driving interest rate changes is inflation. Inflation has run higher than the government-set target of 2% for many years, rising as high as 11% in October 2021. As of December 2025, it's at 3.4%, according to the Office for National Statistics.
By raising interest rates when inflation is high, the Bank of England's MPC aims to lower demand in the economy, making borrowing (including mortgages) and buying products more expensive in the process. In doing so, inflation should, in theory, come down.
Once inflation stays low for a sustained period and the economy shows clear signs of growth, then interest rates should stabilise and eventually come down.
With steady growth, the MPC will feel more comfortable with a lower rate, as businesses will be willing to invest in infrastructure and housing, creating more jobs and a healthier tax base for the government.
Use MoneySuperMarket’s mortgage calculator to see how much you can borrow
How much do you owe on your mortgage?
This is the amount outstanding on your most recent statement - check your paper or online banking to find it, or give your lender a call if you can't.
NB it isn't the same amount you borrowed initially, as each payment you make reduces what you owe.
How long until it is fully repaid?
This is how long until you are completely mortgage free. So if you originally took out a 25 year mortgage five years ago, then enter 20 into here.
This should be on your statement, application info or can be obtained from your lender.
What type of mortgage do you have?
A repayment mortgage means that, over the length of the loan, you will repay the full amount you borrowed as well as some interest.
An interest-only mortgage means you only pay the interest, and once the loan is over (eg, 25 years after you took it out), you still owe the amount you borrowed.
If you don't know which type you have, call your lender to ask.
Enter your current annual interest rate
This should be on your annual statement or the agreement you received when you took out the mortgage. If you can't find it, give your lender a call.
If you are currently on a short-term promotional rate - a fixed-rate deal for example - enter that rate here.
Now for overpayments... do you want to make a one-off and/or a regular payment?
Many mortgage lenders let you make some overpayments without charging you a fee for doing so. There is usually a limit to this though, and if you overpay by more you may be charged.
The limit is usually either a percentage of your normal monthly payment (eg, you can only pay 20% more per month) or a percentage of your outstanding balance (eg, each year you can overpay by up to 10% of the amount you owe in total). Call your lender to check how much you are allowed to overpay by.
Oops! Are you sure? This doesn't look right.
Oops! The overpayments you have chosen will not have an impact on your mortgage repayments.
Results
Let's find how much you can save by overpaying your mortgage. Just pop in a few details to get started.
Grab a full quote
To get a more accurate figure tailored to your financial situation, complete our affordability assessment - it only takes a few minutes Get a full quoteYou can also compare mortgage rates and check affordability using our mortgage comparison tool, or try our other mortgage calculators.
How have interest rates changed?
As of December 2025, the base rate stands at 4%. As recently as 2021, the base rate was just 0.1%.
The Bank of England's decision to maintain the base rate at a comparatively high level means that over the last few years those on fixed term mortgages coming to the end of their deal have had to move to mortgage deals that are much more expensive than their previous plan.
Meanwhile, those on variable rate mortgages saw their monthly payments rise throughout 2022 and 2023, before three cuts between August 2024 and February 2025 brought some welcome relief.
Why would interest rates go up?
Interest rates can go up for a number of reasons. Inflation is the primary driver, and this can be pushed higher thanks to external factors beyond government control.
In recent years, inflation increased due to the war in Ukraine driving up the price of oil and crops. This has in turn made shipping such goods more expensive, with prices being passed on from businesses to consumers. It has seen everything from groceries to petrol soar in price.
Such high inflation can be tempered by higher interest rates, which makes goods more expensive, dampening demand and forcing suppliers to cut prices, so that goods then become cheaper.
How do higher interest rates affect the housing market?
Mortgages and mortgage rates usually go up when the Bank of England base rate rises. Often, the rates lenders charge are higher in order to cover their costs.
When mortgages become more expensive, it means that the housing market theoretically slows down.
That’s because monthly payments for mortgages are more expensive, especially compared to a few years ago, when some two year fixed mortgages were offered on deals below 1%.
That makes it harder for first time buyers to find an affordable deal, even more so because inflation has pushed house prices up and made the need for even bigger deposits greater.
Remortgaging also becomes more expensive, as does moving home, as homeowners have to find extra money for monthly payments and their new mortgage.
Anyone seeking any type of mortgage, in fact, may also struggle to choose between a fixed rate, tracker, or variable rate mortgage, as the rates are currently so unpredictable for a new deal.
The end result is a slower housing market with prices, in theory, coming down. The ideal situation is that this then makes it more affordable for people to move, with interest rates from lenders falling in turn. This can also affect property values.
The balance for policy makers is to ease house prices without making it so expensive to borrow that it provokes a crash in the housing market, which could be devastating for millions of homeowners and potential buyers.
Our other useful guides
Should I Extend My Mortgage to Lower My Monthly Costs? | MoneySuperMarket
Tenants-in-Common Mortgages Explained | MoneySuperMarket
Do I Need a Solicitor to Sell My House? | MoneySuperMarket
How to Remortgage | MoneySuperMarket
Your home may be repossessed if you do not keep up repayments on your mortgage.
Author
Joe Minihane
Mobile and broadband expert
Joe Minihane is a freelance journalist and author with 20 years' experience. Having worked on staff at Stuff and T3, as well as writing about consumer technology for publications including Wired and...
Reviewer
Jonathan Leggett
Former Senior Content Editor
With over 15 years of experience in online content and journalism, Jonathan is a former MoneySuperMarket’s editor at large and works across our Broadband, Mobiles, Energy and Money channels. Along...
