May 2025 Mortgage Market Update - Bank of England Base Rate Reduction
🏡 May 2025 Mortgage Market Update – Base Rate Cut Sparks Market Moves
In April, we covered how mortgage lenders price their rates using tools like SONIA and interest rate SWAPS. This month, we’ve seen a major development that’s already shifting the market: the Bank of England’s first base rate cut of 2025.
🔻 BoE Cuts Base Rate to 4.25% – What That Means
As widely anticipated, the BoE reduced the base rate by 0.25% in May, bringing it down from 4.5% to 4.25%. It’s the first of three cuts the market expects this year (with further moves likely in August and November).
This decision follows:
- Continued slowdown in headline inflation (now 2.6%)
- Gradual easing in services inflation (still sticky at ~4.8%)
- Rising unemployment, now at 4.5%, with further softening expected
The BoE’s tone suggests a
gradual easing cycle, focused on balancing inflation risks with growing signs of economic fragility.
💹 Swap Rates React – But Less Than You Might Think
While the base rate cut is a headline event, swap rates didn’t fall as much as borrowers may hope.
- 2-year swaps: down only ~0.10% after the cut
- 5-year swaps: flat to slightly lower
Why? The market had already priced in this move, and lingering inflation concerns are capping expectations of deeper cuts. As discussed in April (see April's post here), swaps—not just base rates—drive fixed mortgage pricing, so don’t expect instant, sharp drops in rates.
🏦 Lender Reaction – Cautious Optimism
So far, we’ve seen a mixed response from lenders:
- Barclays, Halifax and HSBC quickly trimmed fixed rates by 0.10–0.15%
- NatWest and Santander have been more cautious, adjusting only selected products
- Nationwide reducing rates by up to 0.22% on 09.05.25, the 2nd reduction for the week
Expect more movement in the coming weeks, especially if swap rates ease further or if competition heats up.
🛑 Why Rates May Not Fall Much Further (For Now)
Even with the base rate cut:
- Swap rates remain higher than they were pre-mini-budget (Oct 2024)
- Wage growth is still a concern for the BoE
- Global risks (e.g. U.S. tariffs, China slowdown) could limit future cuts
This means we may see modest rate improvements, but not a return to ultra-low levels any time soon.
🧭 What Should Borrowers Do Now?
If your fixed deal ends in 2025 or you're house-hunting:
- Lock in now: Lenders are trimming rates slowly, but live pricing can still change daily
- Monitor repricing: Some lenders update weekly, others more slowly—work with a broker who can catch market drops and take the hassle away for you
- Check for early switch options: Many lenders allow you to move to a lower rate before completion if pricing improves
🔍 Sarah Grace Mortgages: What We’re Seeing
We’ve seen a surge in clients locking in fixed deals ahead of summer.
Our team is actively:
- Tracking daily lender moves
- Rate switch when better rates become available
- Helping clients navigate types of rate available and timing thing right
✍️ Final Thought
The BoE’s cut is the start of a turning point, but it’s no return to 1% rates. Markets are cautious, lenders are selective, and volatility remains. Smart borrowers are proactive, not reactive—especially in a market that changes week to week.
If you missed our April breakdown of how lenders price mortgages, you can catch up here:
➡️ [See April 2025's post
here]
Bank of England Holds Base Rate at 4.00% - What It Means for Mortgage Borrowers The Bank of England has held the base rate at 4.00%. Find out what this means for mortgage holders, first-time buyers, and those remortgaging - plus what could happen next for UK interest rates. Bank of England Base Rate Remains at 4.00% The Bank of England’s Monetary Policy Committee (MPC) has voted to hold the UK base rate at 4.00% - maintaining its cautious stance as inflation remains above target and economic growth stalls. While the decision was widely expected, it carries major implications for mortgage borrowers , homebuyers , and anyone planning to remortgage in the next year. Why the Bank of England Held the Base Rate Despite progress in lowering inflation, the BoE remains concerned about lingering price pressures. Inflation is currently around 3.8% , still well above the 2% target . Wage growth continues to fuel inflationary risks. The UK economy is showing signs of weakness, with flat GDP growth and slowing consumer spending. In short, the Bank wants to avoid cutting too early and reigniting inflation - but also doesn’t want to push the economy into recession. Holding at 4.00% keeps the balance between stability and caution. What This Means for Mortgage Borrowers Tracker and Variable-Rate Mortgages If you’re on a tracker or variable-rate mortgage , your monthly repayments will remain unchanged - for now. However, interest costs remain much higher than before 2022, and rate cuts are unlikely in the short term . Borrowers should plan for elevated repayments through 2025 and possibly into 2026 . Fixed-Rate Mortgages Even though the base rate hasn’t changed , fixed-rate mortgage pricing depends on swap rates - market indicators that reflect expectations of future BoE decisions. Lenders have made small reductions in some fixed-rate deals. The best 5-year fixed deals are now hovering around the mid-4% range , depending on loan-to-value. The outlook remains uncertain, so those nearing the end of their fixed deal should start exploring remortgage options early. First-Time Buyers and Remortgagers For first-time buyers , this rate hold means relative stability in borrowing costs, but it’s not yet time to expect major rate drops. Remortgagers should act early - ideally six months before their current deal expires - to secure competitive rates. Working with a mortgage broker can make a big difference in finding the best offers as markets fluctuate. What Could Happen Next with UK Interest Rates The BoE has been clear: rate cuts will only come once inflation is firmly under control . Markets currently expect the first cuts to begin in mid-2026 , though this could shift depending on economic data. Key indicators to watch include: Inflation , particularly in services Wage growth and unemployment rates Market swap rates , which directly affect fixed-rate mortgage pricing If inflation continues to cool and the economy slows further, gradual rate cuts could begin. But the Bank of England is prioritising long-term stability over short-term relief. Key Takeaways for UK Mortgage Borrowers Base rate unchanged at 4.00% following the latest MPC meeting No change for tracker or variable-rate mortgage repayments Fixed-rate mortgage rates may edge down slightly as markets adjust Rate cuts are expected to be gradual - not immediate Borrowers should budget for higher repayments throughout 2025 Final Thoughts The Bank of England’s decision to hold the base rate at 4.00% signals a steady but cautious phase for the UK economy. For mortgage borrowers , this means stability at elevated levels - and the importance of preparation over panic . Whether you’re buying, remortgaging, or simply reviewing your finances, staying informed about inflation trends and lender movements will be key to making smart mortgage decisions in the months ahead.
Crunching numbers with a cuppa – because mortgages don’t have to be boring! Autumn Leaves & Market Moves As the clocks go back and the evenings draw in, the mortgage market is settling into its own seasonal rhythm. October gave us plenty to think about – a mix of cautious optimism, flickers of rate reductions, and lenders testing the waters. So what’s next for November? Let’s unwrap it. Fixed Rates: A Mixed Bag (But Some Good News Brewing) The Bank of England base rate remains steady at 4.00% , and while that number grabs headlines, it’s swap rates (what lenders use to price fixed deals) that really set the tone. Lately, those swap rates have wobbled – but the overall trend looks to be softening. That means we might soon see some lenders trimming their fixed-rate products again after the autumn blip. If your current deal ends within the next six months, it’s a great time to get options lined up — we can help lock something in now and keep an eye open in case rates improve before completion. Housing Market: Finding Its Feet The property market isn’t roaring, but it’s far from flat. UK Finance predicts a 10% rise in purchase lending this year , suggesting cautious confidence is returning. Buyers are still price-sensitive, but improved affordability (and some sellers adjusting expectations) are helping keep things ticking over. If you’re thinking of moving in the new year, now’s the perfect time to start planning. Policy & Tax Watch There’s plenty of chatter around potential stamp duty tweaks and landlord tax relief reviews — but as of early November, nothing concrete has been confirmed. It’s tempting to wait for big announcements, however in our experience, timing your mortgage or move purely on “maybe” policy changes can backfire. Focus on what you can control — your budget, goals, and timeline — and we’ll navigate any updates as they come. What to Watch This Month Keep an eye on these key events shaping the market: Bank of England MPC Meeting – 6th November The tone of this meeting will influence expectations for any spring 2026 rate moves. Even a hint of softer inflation language could encourage lenders to act. Swap Rates & Gilt Yields The unsung drivers behind fixed mortgage pricing. A small dip here could mean cheaper rates by December. Lender Competition Expect a few “rate war” headlines as banks jockey for year-end business. If one major player cuts, others often follow. Our Quick Tips for November Remortgagers: Check your deal expiry. Six months’ notice gives us maximum flexibility. First-time buyers: Don’t be disheartened by headlines – many 90–95% deals are still available. Landlords: Review yields carefully; some lenders are loosening criteria for limited-company buy-to-let. A Friendly Final Word November feels like a month of “nearly there” for the mortgage world. The ingredients for a brighter market are simmering away – falling inflation, stable rates, and lenders re-entering the fray. Our advice? Plan ahead, stay informed, and don’t wait for perfect timing – it rarely exists. Whether you’re exploring options, preparing to remortgage, or dreaming of your first set of keys, let’s chat and make a plan that works for you.
The Renters’ Rights Act 2025 has officially become law — and it’s set to change the way landlords let and manage property across England. While most of the new rules will come into force during 2026, now’s the perfect time to prepare and understand what’s coming. The big changes landlords need to know 1. Goodbye to Section 21 “no-fault” evictions The biggest headline: Section 21 is being scrapped. All tenancies will eventually move to periodic (rolling) agreements, meaning landlords can only end a tenancy for specific, lawful reasons — such as selling the property or wanting to move back in. It’s a huge shift, so get ready to adjust how you plan notice periods and tenant management. 2. End of rent-bidding wars You’ll no longer be able to accept offers above the listed rent. The goal is to create a fairer, more transparent market — and it’ll be up to landlords and agents to stick to the advertised figure. 3. Raising property standards A new “Decent Homes” standard is being introduced for the private rented sector, aligning with what’s already in place for social housing. That means tighter rules around damp, mould, and basic living conditions. Many of these expectations are already familiar to professional landlords, but enforcement will become more consistent and more visible. 4. Transparency and accountability Two new systems are on the way: A Private Rented Sector Ombudsman, allowing tenants to raise complaints without going to court. A Landlord Database, giving renters more visibility into who owns and manages their home. If you’re managing multiple properties or using agents, make sure your documentation, communication and safety certificates are up-to-date before registration opens. 5. Fairer rent rules and pets Rent increases will face tighter restrictions (no more frequent mid-tenancy hikes), and renters will have a formal right to request pets — with sensible safeguards for landlords. When it all happens 27 Oct 2025: “Awaab’s Law” takes effect for social landlords (faster action on serious hazards). 28 Oct 2025: The Renters’ Rights Bill becomes law. 2026 onwards: Key reforms — including the end of Section 21, new standards, and the Ombudsman — start in stages. The Government will announce specific start dates for each measure in 2026. What landlords should do now Review your tenancy agreements. Make sure your terms are flexible enough for a move to periodic tenancies. Audit your properties. Address any damp, mould or repair issues early — new standards will make these top enforcement priorities. Get your paperwork in order. You’ll soon need to register with the landlord database, so organise gas safety, EPC, and other compliance docs now. Talk to us! If you’re planning to sell, refinance, or adjust your portfolio strategy, understanding how the new tenancy rules could affect timelines and yields is essential and that’s where we can help! Our view This Act is a major shake-up, but not necessarily a bad one. Landlords who maintain good-quality homes and communicate clearly with tenants are already doing most of what’s being asked. The key now is to plan ahead, both financially and operationally so that you stay compliant and profitable under the new rules. If you would like to discuss how these changes might affect your buy-to-let plans, refinancing options, or portfolio structure, get in touch with the team at Sarah Grace, we’re here to help you stay ahead of the market.
