Published: February 3, 2025

A guide on UK mortgage rates

Written by Alicia O'Boyle
Manchester property evening image

The current Bank of England base rate stands at 4.5%*, after a recent cut in February 2025, following two previous cuts in August and November last year. As this blog explores, this interest rate plays a crucial role in influencing UK mortgage rates.

When purchasing property in the UK, the most common route to purchase is through acquiring a mortgage. The mortgage will be agreed with a bank, based on the loan to value (LTV) and available mortgage rates, which fluctuates in line with economic conditions. The mortgage rate is the interest rate charged by the lender for a mortgage loan. In simple terms, it is the percentage of the amount borrowed that the borrower pays back to the lender.

As UK real estate is a mature market established over hundreds of years, there are many mortgage products and trends to be aware of when considering your mortgage options. 

Read on to learn everything you need to know about UK mortgage rates.

Factors that influence UK mortgage rates

There are several factors that influence mortgage rates in the UK. One significant factor is the Bank of England’s base rate, which fluctuates in line with inflation. Lenders will often adjust their mortgage rates to increase alongside the base rate. A decrease in the base rate can also lead to a lower mortgage rate. 

To tackle inflation, the Bank of England may increase the base rate, therefore consequently affecting UK mortgage rates. Overall GDP growth and unemployment rates also affect the overall economy, and therefore mortgage rates also. 

Originally mortgages were only offered from building societies. Now, with so many banks able to offer a range of mortgages there is a much higher level of competition. This results in varying mortgage options and rates per bank, to entice more individuals to finance the property purchase with them, rather than their competitors. 

Another significant factor influencing mortgage rates is supply and demand. When there is a large increase in demand for property, prices increase and subsequently as do interest rates. The UK historically has a market where demand far outweighs supply, making it an excellent choice for property investment. 

Current trends in UK mortgage rates

UK mortgage rates differ based on inflation.

UK mortgage rates increased at record pace in 2022. Following the pandemic inflation rose, with the Bank of England raising the base rate also. Since December 2022, the average mortgage rate has steadied, with the 5 year fixed rate consistently remaining between 5.23% and 4.1%. 2024 saw a decrease in mortgage rates, a trend that is predicted to continue for 2025. The drop in mortgage rates has seen an increase in property sales, as more buyers are enticed back to the market. 

2025 is set to be a fantastic year for property investment, as mortgage rates increase affordability. The increase in property demand this year will likely see a hike in property prices over the next few years, making now a fantastic time for property investment in the UK. 

Types of mortgages

There are a variety of options when selecting a mortgage, ranging from type of mortgage rate to the length of the mortgage term. It is important to consider all choices when investing in property in the UK. 

Usually mortgage terms range from 15-35 years long, with 25 years being a popular choice among UK homeowners. Shorter terms generally result in higher monthly repayments, but lower overall interest costs, with the opposite applicable for longer terms. The choice of terms depends on individual circumstances and long-term financial goals. 

Fixed rate:

  • Fixed rate mortgages offer more stability, as you will secure an interest rate for a specific, agreed term. This provides predictability in monthly payments, and will assist with budgeting. Fixed rate mortgages are typically available in two-ten year terms. 

Variable:

  • Variable mortgages differ to fixed, with interest rates that fluctuate regularly depending on current market conditions – often changing as a result of the Bank of England’s base rate. This can lead to a lucrative interest rate initially, however also carries the risk of higher payments if interest rates rise. 

Length of term:

  • Usually mortgage terms range from 15-35 years long, with 25 years being a popular choice among UK homeowners. Shorter terms generally result in higher monthly repayments, but lower overall interest costs, with the opposite applicable for longer terms. The choice of terms depends on individual circumstances and long-term financial goals.

History of UK mortgages

Real estate in Britain has long been the go-to investment. As a trusted asset with a strong history, the UK property market is a consistent investment with property prices steadily trending upwards.

The history of UK mortgages is lengthy, with the first mortgage in England tracing back to the 12th century. While periods of high inflation and economic uncertainty have inevitably led to rising rates, the overall trend has been a gradual decline, resulting in cheaper mortgage repayments. This has established a climate of greater accessibility for homeownership for a range of people.

Property investment with Select Property

Both Manchester and Birmingham, two top cities in the UK, are attracting global property investors. Recently forecast by JLL to see rental and sales growth circa 20% over the next five years, the time to invest is now. 

With international offices across the UK, Asia and the Middle East, Select Property has over two decades experience in developing luxury property in the UK. Contact our team today to develop your investment portfolio and acquire one of the most sought-after properties in the UK. 


**Disclaimer: This information is correct at the time of writing, is for general knowledge and guidance only and does not constitute financial advice.**

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