Do All Roads Lead to Cheaper Mortgages? Exploring the Path to Lower Rates
Do All Roads Lead to Cheaper Mortgages? Exploring the Path to Lower Rates
March promised to be a month of big announcements but failed to deliver many impactful headlines. That’s not to say there was nothing to celebrate. Both the property and finance sectors were thrilled that inflation dropped back to 2.8%. Although it’s still a way off the Government’s 2% target, it does reduce the possibility of any immediate base rate increases.
Increasing chance of a future rate cut
The Bank of England’s monetary policy committee met in March and held the base rate at 4.5%. The inflation announcement – which was a greater drop than expected – has filled some fiscal experts with optimism regarding further base rate cuts this year.
The chance was quantified by The Guardian, who reported that financial markets had ‘priced in a 55% chance of the central bank lowering its key base rate by a quarter of a percentage point to 4.25% on 8th May 2025.’
While the base rate and inflation are important to our daily lives, home movers really want to know how March’s news will affect mortgage rates. Whether it’s a first home loan, onward move, investment purchase or remortgage, there is a pressing desire for cheaper repayments, and we just might be heading that way.
The Chancellor failed to cave in to demands and reform stamp duty for the better. The tax didn’t even get a mention in her Spring Announcement, with the new thresholds (and more expensive bills) set for introduction from 1st April 2025.
Mortgage repricing
That’s why the news filtering out of the mortgage market this spring is worth shouting about. At the time of writing, several lenders have released more attractive deals for home movers, first-time buyers and buy-to-let investors. Among them are Santander, Molo, Landbay, UTB Mortgages and TSB. Encouragingly, Moneyfactscompare reported several two-year, fixed-rate mortgages were being repriced with lower rates.
We have also seen a return to some sub-4% mortgage rates, particularly for five-year, fixed-rate products. Two-year, fixed-rate home loans are hovering just above 4%. Mortgage rates are expected to reduce further if and when the Bank of England next cuts the base rate – perhaps in as little as six weeks.
A spring in the sales market’s step
What will property buyers find if they secure a home loan this spring? The latest clutch of house price indexes reveals property values that continue to inch upwards. Zoopla’s latest report highlights this, revealing the UK’s average house price increased by £100 between January and February 2025.
The portal says the UK’s average house price is now £267,500 – 1.8% more than at the same point in 2024. The latest Halifax House Price Index also showed annual house prices were rising, with a more bullish year-on-year increase of 2.9%. The bank has the UK’s average house price slightly higher at £298,815.
More sellers, more choice
Rightmove’s March house price index shed light on the briskness of the market. All the vital signs are on the up, starting with asking prices. There has been a 1.1% asking price increase over the last four weeks. The market is generally busier than 2024, with the number of sales agreed in March 2025 up 9% when compared to March 2024. The number of new sellers coming to market also showed uplift, rising 8%.
Everything points to a healthier buyers’ landscape. The tantalising prospect of cheaper mortgage rates in late spring/early summer is joined by a show-stopping Rightmove headline – the choice of homes for sale is at its highest for a decade.
Could the market run into turbulence?
Of course, there is a small sting in the market’s tail. Experts are standing by to see how the new stamp duty rates will impact buying and selling activity, especially during the quieter summer months.
Another aspect that could disturb the delicate equilibrium is the introduction of the Renters’ Rights Bill. Much of the pace that was building in the House of Lords has been quashed, with the timeline for the Bill becoming an Act moving from Spring 2025 to more likely Autumn 2025.
Landlords leaving
The lettings market has already shown signs of weakening, with landlords looking to offload their buy-to-lets in the wake of incoming reforms. In fact, new data from TwentyCi confirmed the number of landlords selling their rentals hit a new high at the start of 2025. Its analysis revealed 17.4% of all new sales listings were previously rental properties – a figure that was almost 50% higher than last year’s statistic.
As many people have been at pains to point out, a reduced supply of rental properties will lead to rent rises. Although there were some indications that rental values had peaked, with HomeLet charting four consecutive months of rental value falls earlier this year, the trend has been halted.
Rent rises return
Its latest rental index showed average rents for newly agreed tenancies increased by 0.3% in February. This means tenants are paying an average of £1,275 a month. Increases were seen in all but two UK regions, with the most pronounced rises seen in the East Midlands (1.3%), the North East (1.2%) and Scotland (1%). Rental values stayed the same in the two regions that didn’t record an increase – Greater London and the North West.
While it’s easy to get caught up in speculation and conjecture concerning the months ahead, all eyes should be on Easter – a period in the property market calendar that’s characterised by Bank Holidays and a peak in activity.
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