If you’re keeping an eye on the UK mortgage market, there's been quite a bit of talk recently regarding base rates and their impact on mortgage rates. The last few years have been turbulent with mortgage rates reaching rock bottom and then jumping up to shocking highs.
Now, we’re finally starting to see some consistent signs of relief. The Bank of England Base Rate has now fallen five times in the past year - a move that’s beginning to influence mortgage pricing across the board.
While we’re still a long way off from the low rates of 2020 and 2021, many high-profile lenders, including Barclays, Halifax, HSBC, and Santander, have already started making (or planning, from September) reductions to select mortgage rates.
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What Is the Bank of England Base Rate
The Bank of England (BoE) plays a crucial role in setting the Base Rate, which directly influences mortgage rates.
In August 2023, the Base Rate peaked at 5.25%, the highest level since 2008. Since then, it has gradually fallen, with cuts in August 2024, November 2024, February 2025, May 2025, and most recently in August 2025, bringing it down to 4.00%.
The BoE’s Monetary Policy Comittee reviews the Base Rate roughly every six weeks, adjusting it based on inflation, economic growth, and financial market conditions. While inflation briefly dropped to the 2% target in early 2025, it has since fluctuated – reaching 3.6% in June 2025 – which means the path for further cuts remains uncertain, but cautiously optimistic.
How Does the Base Rate Affect Mortgage Rates?
The Base Rate plays a key role in shaping mortgage deals – but the impact depends on the type of mortgage you have.
If you’re on a fixed-rate deal, your monthly payments won’t change until your current term ends. Most lenders price-in expected Base Rate movements ahead of time, so while rates on new deals may drop slightly, sharp reductions aren’t guaranteed.
Tracker mortgages usually follow the Base Rate more closely. According to Petar Lekarski from Money Saving Expert:
“If you're on a tracker, your rate will drop by 0.25 percentage points [following the August BoE announcement]. The reduction is equivalent to roughly £15 a month lower repayments per £100,000 of mortgage debt.”
In short, while Base Rate changes can influence the wider market, their impact on your mortgage will vary – which is why it’s always worth reviewing your options before making a decision.
Current UK Mortgage Interest Rates
Average Rates for Fixed Mortgage Deals
As of 20th August 2025, the average rates for fixed mortgage deals are:
- Two-Year Fixed Rate Mortgage (market average): 4.49%, down by 0.65% from last year
- Five-Year Fixed Rate Mortgage (market average): 4.49%, down 0.28% from last year
- Lowest Two-Year Fixed Rate: 3.73%, which is down by 0.46% from last year
- Lowest Five-Year Fixed Rate: 3.85%, up slightly by 0.02% from last year
[Figures sourced from Rightmove via Podium data, based on 95% of the mortgage market]
These averages are based on mortgage products with a typical £999 fee. Rates vary depending on deposit size, lender, and individual circumstances, so it’s important to check what’s currently available to you.
Average Rates for Variable Mortgage Deals
Latest figures from uSwitch (via Mojo Mortgages) suggest the average variable mortgage rates are:
- Two-Year Variable Rate (75% LTV): 4.45%
- Standard Variable Rate (SVR): 6.74%
Variable rates can fluctuate more frequently than fixed rates, and are often tied to changes in the Bank of England’s Base Rate. While they may start lower, they carry more risk – especially in an uncertain economic climate.
What Do These Rates Mean for Borrowers?
Rates vary based on deposit size and lender criteria. For example, average rates for homebuyers with 5–10% deposits currently sit at 5.17% for a two-year fix and 5.12% on a five-year fixed rate mortgage. [Rightmove, 20th Aug 2025]
While we’re unlikely to see a return to the ultra-low mortgage rates of 1–2% any time soon, the downward trend remains steady. Lender competition and improved inflation figures are creating space for gradual reductions, with some experts expecting best-buy rates to edge towards the mid-threes in 2026. [MSE, 19th August 2025]
We’re also continuing to see more borrowers opting for ultra-long mortgage terms, especially first-time buyers looking to lower monthly costs. While the standard term remains around 25 years, 30 and even 40-year mortgages are becoming increasingly common – though they typically stretch further into retirement.
Will Mortgage Rates Decrease Again in 2025?
The Bank of England Base Rate was cut to 4% on 7 August 2025, following earlier reductions in May, February, November 2024, and August 2024. This marks a steady fall from its peak of 5.25%, the highest level seen since 2008.
With inflation continuing to fluctuate – most recently rising to 3.8% in July, which is still 1.8% above desired levels – the path forward remains uncertain. While some indicators are promising, the BoE must balance curbing inflation with avoiding economic harm or a scenario where rates have to be increased again soon after a cut.
Still, there’s cautious optimism from across the mortgage industry. According to David Hollingworth from L&C Mortgages, speaking to MoneySavingExpert (7th August 2025):
"There will still be hope that base rate can fall again this year and potentially into next year as well. However, the latest decision to cut was tight and some [Monetary Policy] Committee members preferred to hold amid concern that inflation could remain higher for longer than previously hoped."
What does this mean for mortgage rates? Most experts agree that many lenders have already priced in anticipated cuts, so any future reductions may be small and gradual rather than dramatic. That said, with increasing competition between lenders and swap rates continuing to fall, we could still see small improvements over the coming months – particularly for buyers with higher deposits or those remortgaging at lower loan-to-value (LTV) ratios.
For now, for both homebuyers and those looking to remortgage, this period of rate cuts could present a timely opportunity to lock in a better deal.
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This article is for general information only and does not constitute legal advice. For guidance tailored to your specific situation, please speak to a qualified solicitor.