What to Expect for Mortgage Rates in 2025

Rates are projected to hold steady between 4% and 5%, while relaxed lending criteria may improve affordability for homebuyers.

Following the recent base rate reduction—from 4.5% to 4.25% in May 2025—analysts anticipate that mortgage rates will remain relatively stable, hovering between 4% and 5% throughout the remainder of the year.

Since reaching a high in mid-2023, mortgage costs have steadily eased. Back in June 2023, the average rate for a five-year fixed mortgage at 75% loan-to-value climbed to 5.8%, significantly increasing monthly repayments for many borrowers.

Now, that same loan product has seen a notable decline, with the average rate down to approximately 5.04%, offering some relief to prospective buyers and existing homeowners alike.

Average mortgage rates in May 2025

All average rates are provided by Mojo Mortgages. The above are the average mortgage rates for various products across the market. These won't necessarily be available to you, and are not the only product types available.

Most forecasters are expecting mortgage rates to remain in the 4-5% range this year, even if inflation and the base rate edge lower.

Our Executive Director of Research, Richard Donnell, says: ‘Expectations of lower interest rates are already priced into fixed rate mortgages today.

‘Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling.

‘Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.’

Why are mortgage rates going down?

Mortgage rates began to go down in the latter half of 2023, as inflation dropped from 6.3% in September to 4.2% in December.

In June 2024, inflation hit its 2% target, but it has risen slightly since then and is currently sitting at 2.6%.

The Bank of England cut the base rate twice last year, first in August and again in November - and then again in February 2025.

At the most recent Bank of England meeting in May 2025, the Bank dropped the base rate to 4.25%. Some forecasters are predicting it will fall further by the end of the year.

The bank rate determines the interest rate the Bank of England pays to commercial banks that hold money with them. It influences the rates those banks charge people to borrow money or pay on their savings.

What factors affect interest rates?

Inflation is the main reason interest rates have been high in the UK over the last 3 years. An unexpected rise in demand - or decrease in supply - can cause inflation to rise.

At the end of 2021, the Bank of England began to raise the base rate in order to reduce inflation and help slow down price rises for everyday items including food, petrol, gas and electricity.

Inflation is currently hovering over its 2% target at 2.6%, so the Bank of England needs to keep the base rate high enough to ensure inflation doesn't rise again.

Global shocks can also have an impact on inflation, such as wars, pandemics and tariffs as they affect the flow of goods around the world.

Easing Affordability Tests Could Strengthen Buyer Confidence in 2025

A shift in how lenders assess mortgage applications may soon improve access to home financing. One significant change on the horizon is the easing of affordability checks, which could help boost borrowing power and reinvigorate housing market activity this year.

Although borrowers typically focus on their actual mortgage rate—currently averaging around 4.5% for a 5-year fixed term—lenders also assess whether they could afford repayments at a much higher hypothetical “stress” rate. At present, many lenders use stress rates of 8–9%, making it harder for buyers with smaller deposits to qualify.

If lenders return to pre-2022 stress levels of 6.5–7%, buyers could see their borrowing capacity increase by up to 20%. For example, a first-time buyer currently needing to show they can cover £1,550 in monthly payments at an 8.5% stress rate would only need to demonstrate affordability at £1,275 under a 6.5% rate—freeing up their budget and increasing buying options. While the exact impact varies by lender and borrower type, the effect would likely support housing demand and sales.

However, it's important to note that other mortgage regulations and criteria will continue to influence access to credit.

Housing Market Sees More Listings—and More Buyer Choice

As of early 2025, the number of homes on the market is up 12% compared to last year. With more sellers entering the market—many of whom are also planning to buy—there's greater choice for prospective buyers.

This increased inventory may limit upward pressure on prices. “We believe the wider availability of homes will help keep house price growth moderate,” explains Donnell. Buyers may find more room to negotiate, especially on properties that aren’t drawing much interest.

Affordable Regions Lead the Way in Sales Growth

Despite cost pressures from higher mortgage rates, demand remains strong in lower-priced areas. Recent data shows that regions with more accessible housing continue to outperform others.

“Sales volumes are climbing across the UK, but we’re seeing the most robust growth in places with more affordable homes,” says Donnell. Wales, the North West, and the North East are currently leading the way, each with a 10–14% annual increase in sales activity.

These trends highlight the resilience of the market and point to a potential shift in buyer behavior as affordability remains a key driver in 2025.

Key takeaways

• Mortgage rates are expected to hold steady around 4-5% throughout 2025
• A two-year variable rate with a 75% loan-to-value ratio currently averages 4.75% while the average five-year fixed term sits at 5.04%
• The base rate dropped to 4.25% in May 2025 in positive news for households
• Changes to affordability testing by mortgage lenders could make it easier for buyers to borrow
• The Base Rate could fall further by the end of 2025

by Blackstones

Top 10 Budget-Friendly Towns Families Are Flocking To

Explore the trending towns where affordability meets family-friendly living—these spots are gaining serious attention.

Our experts have uncovered the most popular affordable towns for families, crowning Glenrothes in East-Central Scotland number one across the whole of the UK.

In Glenrothes, in the heart of Fife and just an hour from Edinburgh, you can expect to pay an average of £136,900 for a three-bed home – that’s £540 in monthly mortgage payments.

We examined the most affordable towns and then worked out which areas were getting the most interest from property-searchers on Zoopla.

We also calculated an income-to-affordability to ratio to help you work out if one of these places would meet your budget.

Most popular affordable towns for families by region

We looked at the most popular affordable towns by region, discovering that there are affordable places for families to live even in the most expensive UK regions.

Sutton-in-Ashfield in the East Midlands takes the top spot by region, with a three-bed home expected to cost £189,400 or £750 in monthly mortgage payments.

Barking and Dagenham is the most popular affordable area in London. For a three-bed home you’ll pay £1,750 in monthly mortgage payments, based on an average value of £440,300.

Bootle is the most popular affordable town in the North West, with three-bed homes valued at half the national average at £142,900.

Plymouth offers the best affordability for families in the South West of England, with three-bed homes averaging £261,000, or £1,040 per month in mortgage payments.

Here are the best places to live in each region of the UK for families, based on the average price of a three-bed home and the popularity of homes for sale there.

We've also identified the top 10 towns for families to live across the whole of the UK by looking at the most affordable places along with how many people are searching for homes there.

(Source: Zoopla research 2025; *Two full-time earners/ **Estimated earnings required/***Q1 2025)

You’d need an estimated household income of £72,200 to afford a three-bed home in Glenrothes.

We discovered that it’s possible to buy a three-bed home for well under the national UK average house price of £268,000 in all but two of the towns on our list.

Four out of 10 of the most popular towns are in Scotland, including Wishaw (£168,600; £670 a month), Leven (£164,600; £650 a month) and Larkhall (£177,600; £700 a month).

Welsh towns take the second, third and fourth spots in our UK-wide list, with Llanelli (£170,600 on average; £680 monthly mortgage), followed by Neath ( £176,400; £700 a month) and Port Talbot (£160,300; £640 monthly).

Two places in the South East make an appearance - the Kent towns of Dartford and Swanley, whose relative affordability compared to other parts of the region make them popular places for families to live.

Perhaps unsurprisingly though, they are the priciest of the affordable towns on our list of family-friendly hotspots.

Families looking for a three-bed home in Dartford will need to pay an average of £1,680 in monthly mortgage payments, based on an average value of £423,600.

While anyone wanting a three-bed home in Swanley will need to pay £444,900 or £1,770 in monthly mortgage payments on average.

Affordability ‘remains critical’ for families

“This latest analysis paints a clear picture of a market where affordability remains a critical factor for families planning their next home move,” said Richard Donnell, Executive Director at Zoopla.

“What's particularly telling is the level of buyer interest these towns are attracting; three-bedroom homes in the most popular affordable locations are seeing twice the amount of listing views compared to the regional average,” he adds.

“This heightened popularity, coupled with the significant portion of would-be buyers expressing concerns about being priced out of housing, underscores the ongoing challenges facing movers and the clear appetite for value.”

How we crunched the numbers

To hit upon our top 10 of affordable places for families to live, we looked at the most affordable areas nationally and then looked at the popularity of listings of three-bed homes in those areas.

We found that property listing views were twice as high for three-bed homes in the most popular affordable towns compared to the regional average for similar properties.

In order to work out affordability, we measured the ratio of average three-bed house prices in an area to average earnings in the local area.

In each region, 30% of towns with the lowest price-to-earnings ratios were selected, resulting in a final list of 248 towns, plus 10 London boroughs (used in place of postal towns for the capital).

Popularity was ranked based on the average listing views for a three-bed home in each area.

To estimate monthly mortgage repayments for a typical three-bed house in the town, we calculated the cost of a 20% deposit, a 30 year repayment period, with a mortgage rate of 4.3%

A third of buyers fear being priced out

Meanwhile, separate research reveals that a third of buyers are worried they can’t afford to buy in their ideal family home location.

According to a survey of 2,000 UK adults conducted in April, 34 per cent of buyers fear being priced out of their preferred area.

Of those surveyed, 37 per cent said they would be happy to move to an entirely new region in the UK in order to buy a more affordable family home.

The average monthly mortgage payment for a £304,600 three-bed home is currently £1,210. Those surveyed, however, said they felt £870 was a reasonable mortgage payment.

Two in five respondents said they were unwilling to move from their ideal location.

Those willing to move said they would only be willing to move an average of 41 minutes away.

Key takeaways

• We've identified the top towns for families to live in every region of the UK
• We looked at the most affordable places to buy a three-bed home along with how many people are searching for homes there
• Sutton-in-Ashfield in the East Midlands takes the top spot by region, while Barking and Dagenham wins for London, Bootle takes the crown in the North West and Plymouth tops the list in the South West
• We crowned Glenrothes in Scotland the most popular town for families seeking affordability across the whole of the UK
• A three-bedroom home in Glenrothes is listed at £136,900 on average – around half the national average house price of £268,000
• We calculated affordability based on a regional price-to-earnings ratio so you can find out how much you need to earn to buy a three-bed home there
• Separate research shows a third of buyers are anxious about being priced out

by Blackstones