Mortgage rates are already on the decline in anticipation of the Bank of England’s key interest rate decision, scheduled for 8 May. Although lenders are now offering tempting sub-4% fixed-rate deals, the outlook remains more complex—especially for homeowners approaching the end of their current fixed-rate terms.
According to the latest figures from Rightmove, as of 1 May 2025, the most competitive mortgage rates available are 3.75% for a two-year fixed deal and 3.83% for a five-year fix. These figures mark a notable drop from the beginning of the year, when rates were closer to 4%, and are also significantly lower than the current Bank of England base rate.
The financial markets have already priced in a rate cut, with interest rate swaps data showing near-unanimous expectation among traders that the Bank will lower rates at its upcoming meeting. This is largely in response to growing fears of global economic uncertainty, triggered in part by the tariff policies being rolled out by the Trump administration in the United States.
The Bank of England’s Monetary Policy Committee (MPC) will meet next Wednesday to deliberate on the decision, with an official announcement expected at noon on Thursday. Until then, the Bank Rate remains at 4.5%.
While falling mortgage rates are welcome news for some, particularly those entering the market or remortgaging, the broader picture for savers and borrowers alike is still shaped by global economic pressures and ongoing policy shifts.
Stamp Duty Holiday Ends, Price Growth Dips
The growing expectation of falling interest rates isn’t the only factor prompting lenders to make strategic moves at present.
According to Rachel Springall, a finance expert at MoneyFacts, the recent end of Stamp Duty Land Tax (SDLT) relief may also be influencing lenders. She notes that this shift could be pushing them to release more competitive mortgage deals in an effort to attract new business.
Stamp duty is a tax paid by buyers when purchasing property—be it freehold, leasehold, newly built, or through a shared ownership scheme. With the thresholds now revised downward, buyers are having to pay more than they would have just a few weeks ago.
This change in stamp duty policy has contributed to a noticeable slowdown in house price growth across the UK. With buyers facing higher upfront costs, demand has understandably softened.
Nationwide data for April 2025 reveals that annual house price growth dropped to 3.4%. On a monthly basis, prices fell by 0.6%, bringing the average property value down to £270,752 from £271,316 in March.
Nationwide’s chief economist, Robert Gardner, commented that the slowdown was expected. The end of stamp duty relief typically results in a short-term cooling of the market, as was also seen in previous years.
He added that the market is likely to remain subdued in the near term. Historically, such conditions often follow the conclusion of stamp duty holidays or relief measures.
However, there is cautious optimism for the months ahead. Gardner believes that activity may begin to pick up as the summer progresses, even with continued global economic uncertainty.
He pointed out that the underlying conditions for many UK homebuyers—such as improving mortgage rates and stable employment—remain supportive, which could encourage renewed market momentum.
Which Mortgage Products Are People Selecting?
The UK’s mortgage market is currently at a turning point, shaped by two major forces: ongoing global economic disruption caused by tariffs, and the recent end of stamp duty relief at home.
In the UK, homeowners have several financing options when buying a property or remortgaging. These include both variable and fixed-rate mortgages. Variable-rate or “tracker” mortgages follow the Bank of England’s base rate and are typically lower than the lender’s standard variable rate.
Despite the availability of variable options, fixed-rate mortgages tend to be the preferred choice, especially those set for two or five years. These are commonly linked to the Sterling Overnight Index Average (SONIA), rather than the base rate itself.
According to the Bank of England, a significant number of homeowners—around 800,000—are due to come off fixed mortgage deals with interest rates of 3% or lower every year until the end of 2027. This means a steady stream of borrowers will soon be looking for new deals.
Many of these borrowers will find themselves facing much higher rates than what they were previously used to, prompting increased competition among lenders hoping to attract their business.
Given the current climate of falling rates, many borrowers are leaning towards shorter-term deals, such as two-year fixes. This gives them flexibility and the chance to secure better rates in the near future.
With interest rates expected to decline further, locking into a five-year deal may not be appealing for those looking to take advantage of more favourable terms down the line.
The overall picture suggests a mortgage market in flux, where borrowers and lenders alike are carefully weighing up their options as they navigate this uncertain period.
When Rates Were Low, People Locked in for Longer
Homeowners today are behaving quite differently compared to the period following the global financial crisis, when interest rates were at historic lows. Back then, many people opted to lock in their mortgages for longer terms, taking advantage of ultralow rates and the predictability of fixed monthly payments over several years.
Between February 2009 and May 2022, the Bank of England’s base rate remained below 1%, even dropping to 0.1% in response to the economic uncertainty brought on by the COVID-19 pandemic. During this period, five-year fixed mortgage deals were highly sought after, helping borrowers keep costs low over the long term.
These affordable borrowing conditions also encouraged homeownership and helped fuel business expansion, as access to cheap finance was readily available. However, the situation changed significantly as inflation surged following the pandemic and the onset of the conflict in Ukraine.
This shift led to an unusual scenario where two-year fixed mortgage rates surpassed five-year rates, prompting borrowers to opt for shorter terms in the hope that rates would soon fall again.
According to the most recent figures from Rightmove, the average interest rate on a two-year fixed mortgage now stands at 4.73%, slightly above the 4.66% available for five-year deals.
Experts believe this so-called “mortgage rate inversion” may be nearing its end. As the Bank of England is expected to begin cutting interest rates, more homeowners may try to secure longer-term deals to benefit from lower repayments for an extended period.
Since October 2022, average two-year fixed rates have consistently exceeded five-year rates. However, this trend could soon reverse, depending largely on how swap rates shift in the coming weeks.
Finance expert Rachel Springall points out that while this inversion has persisted for some time, changes in market expectations could bring about a return to the usual pattern where shorter-term deals cost less than longer-term ones.
With more rate cuts potentially on the horizon, many borrowers will be watching closely to decide whether now is the right time to lock in a longer-term mortgage.
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