Navigating the 2025 UK Mortgage Market: What Borrowers Need To Know

 

Whether you’re entering the property market, refinancing your home, or expanding your buy-to-let portfolio, understanding the UK mortgage landscape is essential. Amid fluctuating interest rates, evolving lender criteria, and diverse property prices nationwide, staying up-to-date can lead to wiser financial choices. The Quealy & Co. Financial Services Team is here to happily answer any questions you may have about your unique circumstances.

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Mortgage Rates: What Is Happening

The Bank of England kept interest rates at 4.5% in March, a decrease of 0.75 points since August. This suggests stability in the mortgage market. While these rates are high compared to the last decade, relief may be near.

Whilst the fixed rate you can obtain will depend on your individual circumstances, the average fixed-rate mortgage is between 4 and 5%. Homebuyers with a large deposit could find five-year rates under 4.1% and two-year options similar. A 10% deposit could secure rates as low as 4.52%.

However, current rates are still higher than pre-2022 levels, which averaged around 2.5% for a five-year fix and 2.25% for a two-year fix, with the lowest rates in October 2021 being under 1%.

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Will Mortgage Rates Go Up Or Down? 

Trying to predict market trends can feel like navigating a maze with twists and turns. Rather than trying to second guess market movements, focussing on what is right for your own personal circumstances and appetite for risk could prove more beneficial.

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Should You Fix For Two Or Five Years? 

Recent Santander data shows that 65% of customers preferred two-year fixed-rate mortgages in the last three months of 2024, compared to 27% for five-year options. Choosing a duration depends on interest rate outlook and personal circumstances.

Two-year fixes are favoured by those expecting stable or declining rates, while five-year options suit those wanting longer-term stability or anticipating rate increases. Tracker mortgages can be beneficial if rates drop but are often more costly and risky with rising rates.

Choosing the right mortgage involves comparing options and consulting a trusted mortgage broker such as Quealy & Co Financial Services Ltd.

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For Homebuyers: Affordability & Loan Criteria

House prices have stabilised in many regions, although affordability remains a challenge. Most lenders are still applying stricter affordability checks than in pre-2020 times. However, we are seeing:

• Increased appetite from smaller and regional lenders to attract first-time buyers.
• Mortgage guarantee schemes and shared ownership options continuing into 2025 to support lower-deposit buyers.
• Some lenders offering longer mortgage terms (up to 40 years) to reduce monthly payments.

Tip: A mortgage broker can help you navigate niche products or government-backed schemes you might not find on your own.

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For Homeowners: Time to Review Your Deal?

If your current mortgage term is ending within the next 6 months, now is the time to act. With a competitive remortgage, you could potentially:

• Lock in a lower fixed rate before any further changes.
• Use equity built up in your home to secure better terms.
• Consolidate debt or release equity for home improvements.

Watch out for: Early repayment charges and arrangement fees—factor them into the cost comparison when considering switching lenders.

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For Landlords: Buy-to-Let Challenges & Opportunities

The buy-to-let market has faced headwinds—higher mortgage rates, tighter EPC regulations, and evolving tax rules. But opportunities still exist:

• Rising rents across the UK are helping to offset increased financing costs.
• Many landlords are incorporating their portfolios into limited companies for tax efficiency.
• Lenders are increasingly offering green buy-to-let mortgages with better rates for properties with EPC ratings of A–C.

Tip: Consider whether fixing your rate now gives you peace of mind, or if waiting a few months for potentially better deals makes sense for your cash flow. Remember if you decide to wait and your rate is coming to an end, moving onto the Standard Variable Rate will be more expensive.

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Personally Tailored Mortgage Solutions

Whether you’re buying, owning, or investing, the UK mortgage market in 2025 offers both challenges and opportunities. By keeping an eye on interest rates and working with experienced brokers or advisors, you can navigate the year ahead with greater confidence.

Contact us today for a friendly, no-pressure consultation with our experienced Financial Services team at Quealy & Co. Together, we'll discover the ideal mortgage solution for you. Plus, we don't charge any broker fees!

Call us: 01795 505761

⁠Please email us: mortgages@quealy.co.uk

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

Quealy & Co Financial Services Ltd. is authorised and regulated by the Financial Conduct Authority No. 919693

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Sources: Moneyfacts, thisismoney.co.uk, Rightmove, Santander. The information in this article is based on data as of April 5, 2025, and may be subject to change. Always seek professional advice for your specific circumstances.