If you're planning to buy a home in 2025, understanding the current mortgage rates in the UK is crucial to making an informed decision. Rates have been fluctuating recently, and it's important to stay updated on the latest trends to secure the best deal for your future home. Here's what you need to know about UK mortgage rates as we begin the year.

Current Mortgage Rates: What’s Happening?

As we enter 2025, mortgage rates have been slightly adjusting, with the Bank of England's Base Rate currently held at 4.75% as of December 2024. Although inflation has climbed above the Bank’s 2% target (reaching 2.6% in November), experts are predicting some potential drops in the Base Rate during the year, which may eventually lead to lower mortgage rates.

Average Rates for 2-Year and 5-Year Fixed Mortgages:

The lowest available rates for 2-year and 5-year fixed mortgages as of 03 January 2025 are:

These figures are based on an average £999 fee and reflect around 95% of the mortgage market.

Mortgage Rates by Loan-to-Value (LTV)

Your LTV, or the percentage of the property value you're borrowing, plays a significant role in determining your mortgage rate. Here's a breakdown of current rates for different LTVs:

• 95% LTV (5% deposit):
  • 2-year fixed: 5.67%
  • 5-year fixed: 5.29%
• 90% LTV (10% deposit):
  • 2-year fixed: 5.46%
  • 5-year fixed: 5.03%
• 85% LTV (15% deposit):
  • 2-year fixed: 5.07%
  • 5-year fixed: 4.84%
• 75% LTV (25% deposit):
  • 2-year fixed: 4.80%
  • 5-year fixed: 4.65%
• 60% LTV (40% deposit):
  • 2-year fixed: 4.33%
  • 5-year fixed: 4.22%

These figures show how the higher your deposit, the lower the mortgage rate you may qualify for. A larger deposit reduces the lender's risk, which is reflected in the interest rate offered.

When Could Mortgage Rates Start to Drop?

Many experts are predicting that mortgage rates could start to fall in the second half of 2025. If inflation continues to ease and the economy stabilises, the Bank of England may reduce the Base Rate, which could lead to more affordable mortgage options for buyers. However, predicting the exact timeline for rate drops is difficult as it depends on broader economic factors.

Average Monthly Mortgage Repayments

Given the current rates, what would the average monthly repayment look like? Let’s take a look at a typical first-time buyer property with a price of £225,086.

For someone with an 85% LTV, taking out a 5-year fixed mortgage, the monthly repayment would be approximately £1,097 (for a 25-year term). This is very similar to last year's average repayment of £1,096 when the asking price of typical properties was slightly lower.

How Much Can You Borrow?

The amount you can borrow depends on your affordability, which is influenced by your income, outgoings, credit score, and the deposit you can offer. The bigger your deposit, the better your LTV and the lower your rate will likely be. You can calculate your potential mortgage using online Mortgage Calculators or by applying for a Mortgage in Principle to get a more personalised estimate.

Final Thoughts

As we look ahead to 2025, now is a great time to explore your mortgage options and start planning for your new home. With the potential for rate drops later in the year, you could lock in a good deal now or wait for future reductions, depending on your circumstances. Be sure to keep an eye on the market, stay informed, and speak to an expert to ensure you’re making the best choice for your home-buying journey.

If you're ready to explore properties and mortgage options, contact us at JW Woods Estate Agents. Our team is here to guide you every step of the way as you secure your dream home for 2025.

Adapted from Rightmove