Is Now the Right Time to Fix Your Mortgage? 2025 Rate Outlook Explained
With interest rates at a sixteen-year high, many homeowners are wondering whether to lock in a fixed-rate mortgage now or wait for expected cuts in 2026. This guide explains the market outlook and what to consider before deciding.
After nearly two years of continuous rate rises, UK homeowners are facing one of the toughest mortgage environments in more than a decade. The Bank of England base rate remains at 4.75 percent, its highest since 2008, as policymakers work to control inflation. With inflation slowing but still above target, borrowers are asking whether to fix now or wait for potential rate cuts in 2026.
The Current Mortgage Landscape
According to UK Finance, more than 1.6 million fixed-rate mortgages will expire in the next twelve months, forcing borrowers to refinance at higher rates. As of November 2025, the average market rates are:
| Mortgage Type | Typical Rate | Average Term | Notes |
|---|---|---|---|
| Two-year fixed | 5.05% | 25 years | Short-term stability, higher rate |
| Five-year fixed | 4.69% | 25 years | Most popular in 2025 |
| Ten-year fixed | 4.52% | 25 years | For long-term planners |
| Tracker | 4.90% | 25 years | Moves with Bank of England base rate |
| Standard variable | 6.99% | N/A | Usually the lender’s default rate |
Despite a slight decline since the 2023 peak, these rates remain roughly double those seen in 2021.
Why Rates Remain High
- Inflation has not yet fallen to the 2 percent target.
- Wage growth, at about 2.9 percent, continues to pressure prices.
- Energy and housing costs remain above pre-pandemic levels.
- Lenders are cautious about long-term pricing due to global market volatility.
Economists expect the Bank of England to begin cutting rates gradually in mid-2026 once inflation stabilises near 3 percent.
The Case for Fixing Now
A fixed mortgage offers stability and peace of mind, especially in uncertain economic conditions.
Advantages:
- Predictable monthly payments.
- Easier household budgeting.
- Protection if rates remain high longer than expected.
- Some five-year deals already reflect predicted 2026 cuts, offering lower rates than trackers.
Example: A £250,000 mortgage fixed at 4.69 percent for five years equals about £1,414 per month. Payments stay constant regardless of rate changes.
The Case for Waiting or Choosing a Tracker
If you expect rates to fall faster than predicted, a tracker or short-term fix might save money.
Advantages:
- Benefit from lower payments if cuts arrive sooner.
- Easier to remortgage or switch later with fewer penalties.
- Flexibility for homeowners planning to move within a few years.
Example: A tracker at base rate plus 0.25 percent (currently 5.00 percent) costs around £1,438 per month on the same loan. If rates fall by one percentage point in 2026, total savings could reach £1,200 over two years.
How to Decide
Ask yourself the following:
| Question | If Yes | If No |
|---|---|---|
| Do you prefer payment certainty? | Fix | Tracker |
| Will you stay in this home for 5+ years? | Fix | Tracker |
| Can you handle higher payments if rates rise? | Tracker | Fix |
| Do you believe rates will fall quickly? | Tracker | Fix |
If you value stability and plan to stay long-term, fixing is the safer choice.
Tips for Remortgaging in 2025
- Check your loan-to-value ratio (LTV). If your property value has increased, you might qualify for a lower rate.
- Start shopping six months before your current deal ends. Lenders allow advance offers.
- Consider part-fixed, part-variable mortgages for flexibility.
- Overpay if possible. An extra £100 per month can reduce the term by several years.
- Always compare multiple lenders or use a qualified mortgage broker.
Market Outlook for 2026
| Date | Expected Event | Forecast Impact |
|---|---|---|
| Q1 2026 | Inflation near 3.1% | Slightly lower rates |
| Q2 2026 | Possible first Bank of England rate cut | Start of gradual reductions |
| Q4 2026 | Base rate around 4.0% | Five-year fixes may fall below 4.5% |
Analysts from Capital Economics and ING agree that while rate cuts are coming, they will be slow and measured rather than sudden.
The Bottom Line
There is no one-size-fits-all answer. For borrowers prioritising stability, fixing now at around 4.7 percent makes sense and provides certainty. For those willing to take some risk, trackers or shorter-term fixes may offer savings if rate cuts come sooner.
Regardless of your choice, review your options early, calculate the impact on your monthly budget, and make a decision based on your financial comfort rather than speculation.
References:
- Bank of England – Monetary Policy Report, November 2025
- Moneyfacts – UK Mortgage Trends, 2025
- Capital Economics – UK Housing Outlook 2025
- UK Finance – Mortgage Market Report, 2025
