Where will interest rates go this year – and the rest of this week’s mortgage news
Every Friday we take an overview of the mortgage market with independent experts from Moneyfacts. First, we recap the latest news on rates – before finance expert Rachel Springall hones in on what’s happening within the remortgage market…
We start with today’s forecast by Wall Street bank Morgan Stanley, which predicts the UK base rate will be as low as 3.25% by the end of the year and drop to 2.75% in the first half of 2026.
Markets in general are almost certain the Bank of England will make a cut from 4.5% to 4.25% on Thursday, but Morgan Stanley thinks the Bank will be compelled to make deeper and faster cuts by the adverse global economic outlook.
It expects a lower base rate sooner than the likes of Barclays, which predicts 3.5% by the end of the year, in line with most forecasts.
The following chart shows how mortgage rates on the high street have been falling…
Barclays and Gen H were among those lenders cutting fixed rates this week.
Barclays highlights included a two-year fixed purchase mortgage at 60% LTV for a rate of 3.92%, while Gen H cut five-year fixed rates at 85% and 90% LTV by 0.21 percentage points.
Brokers said there was clearly some market pressure to reduce the cost of mortgages at all loan-to-values.
“The mortgage market is certainly warming up, with lenders jostling for position,” said Sean Horton, managing director at Respect Capital.
“Watch this space, as more lenders will likely follow suit as competition intensifies. I still think there’s more to come.”
Gen H’s cuts for those with smaller deposits will be “welcomed in particular by first-time buyers”, said Justin Moy, managing director at EHF Mortgages.
But Elliott Culley, director at Switch Mortgage Finance, warned first-time buyers that most lenders will prioritise their lower loan-to-value products first before giving them the help they need.
House prices
The annual rate of house price growth in the UK slowed to 3.4% in April from 3.9% in March, according to Nationwide figures.
That means the average price of a house increased from £270,752 to £271,316.
The slowdown was expected after a rush in March to complete before changes to stamp duty made buying more expensive for a lot of movers.
The number of UK residential transactions in March 2025 was 104% higher than March 2024, HMRC data showed.
“The market is likely to remain a little soft in the coming months, said Nationwide’s chief economist Robert Gardner.
Nevertheless, activity is “likely to pick up steadily as summer progresses” while unemployment remains low and earnings are rising, and if borrowing costs fall on the back of a Bank of England cut this month, said Gardner.
Tony Redondo, founder of Cosmos Currency Exchange, was less optimistic.
He said: “The Bank of England’s May 8 decision is critical – further cuts might inflate a bubble, while systemic issues like nine-times earnings affordability and wage stagnation must be tackled to prevent a crash.”
Remortaging
Alongside Barclays and Gen H were some other prominent lenders cutting rates this week.
TSB cut by up to 0.20%, Halifax by up to 0.34%, HSBC by up to 0.19%, and NatWest and Royal Bank of Scotland by up to 0.14%.
Week on week, the overall average two and five-year fixed rates fell slightly to 5.18% and 5.10% respectively.
Those borrowers looking to remortgage this year on a longer-term fixed deal will find the average overall five-year fixed rate is much higher than it was back in May 2020, which was 2.35%.
“As a flurry of lenders move to reduce their fixed mortgage rates, it could be a suitable time for borrowers to compare deals and consider refinancing,” says Rachel Springall, finance expert at Moneyfacts.
“This is more pressing for those borrowers who are sitting on a standard variable rate.
“However, before entering any arrangement, it is wise for borrowers to seek advice and ensure they pick the right deal based on its overall package, not just because it offers a headline grabbing low rate.
“Based on a £250,000 mortgage over a 25-year term on a repayment basis, switching to the average two-year fixed rate compared to the average standard variable rate (SVR) would see borrowers save over £300 per month on their monthly repayment.”
“As a remortgage customer, it’s possible you are looking to save on the upfront cost of any deal.
“You might also want a deal to cover a valuation or legal fees. A Best Buy mortgage could be the most cost-effective choice in this instance.”
