What’s on the horizon for UK mortgage rates?

Hopes that the Bank of England would significantly lower interest rates in 2025, leading to cheaper mortgages, now seem less likely, thanks to global bond market sell-offs and Labour’s Budget leading to a surge in borrowing costs. These factors have unsettled debt markets and contributed to higher interest rate expectations. As a result, borrowers face a more uncertain outlook.

As a reminder, the Bank of England opted to hold Bank Rate at 4.75% in December. However, since then, a sharp increase in UK government bond (gilt) yields has pressured rates. Market predictions suggest Bank Rate could fall to 4% by the end of 2025, with some analysts anticipating cuts to as low as 2.75%. However, the volatility in the bond market makes those predictions look optimistic.

What can borrowers do?

With bond market volatility set to continue, borrowers should seek professional financial advice before making any decisions. A financial adviser can help navigate the complexities of rate changes and determine whether to fix a mortgage deal or wait for lower rates in future.

Your home may be repossessed if you do not keep up repayments on your mortgage