What the 4 percent Bank of England rate means for your mortgage in 2025
The Bank of England has kept its base rate at 4 percent while inflation stays close to 3.8 percent. Here is what that combination means for UK mortgage borrowers, from remortgagers to first-time buyers.
The Bank of England has held its base rate at 4 percent in its November 2025 decision, even as inflation has fallen sharply from its peak. For homeowners and first-time buyers, the question is what this means for mortgages now and over the next few years.
Where interest rates are right now
According to the Bank of England, the Monetary Policy Committee voted on 6 November 2025 to keep Bank Rate at 4 percent, continuing a pause after several cuts from the highs of 2023 and early 2024. The Bank says it needs more evidence that inflation is firmly on track to return to its 2 percent target before reducing rates further.
Source: Bank of England – Bank Rate decision November 2025
Meanwhile, inflation as measured by the Consumer Prices Index (CPI) was 3.8 percent in the 12 months to September 2025, unchanged from August, according to the Office for National Statistics (ONS). CPIH, which includes owner occupiers' housing costs, was 4.1 percent.
Source: ONS – Consumer price inflation September 2025
What is happening to mortgage rates
Mortgage rates are set by lenders, but they are heavily influenced by Bank Rate and by financial market expectations of future interest rates.
Recent data from Rightmove shows that as of early November 2025, the average two-year fixed-rate mortgage across most of the market is around 4.4 to 4.5 percent, and the average five-year fixed is around 4.5 to 4.5 percent, with lower rates available for borrowers with larger deposits.
Source: Rightmove – Current UK mortgage rates
Other analyses, such as Moneyweek and independent mortgage advisers, report average fixed rates closer to 4.9 to 5.0 percent for some borrower types, reflecting differences in loan-to-value ratios and fees.
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By contrast, standard variable rates (SVRs) remain much higher. Moneyweek estimates that the average SVR is still above 7 percent, meaning borrowers who fall onto their lender's default rate after a fixed deal ends could pay substantially more than necessary.
How this affects different types of borrowers
Homeowners coming off older fixed deals
Many homeowners fixed their mortgage at very low rates during 2020 and 2021, often around 2 percent or less. When these deals end, they face a significant jump in payments, even though current fixed rates are lower than the peak levels reached in late 2023.
For example, on a £200,000 repayment mortgage over 25 years:
- At 2 percent interest, monthly repayments are roughly £850.
- At 5 percent interest, monthly repayments are roughly £1,170.
That is an increase of about £320 per month.
First-time buyers
First-time buyers face a mixed picture:
- Mortgage rates are lower than they were at the peak of the rate shock.
- However, house prices have not fallen dramatically. HM Land Registry data shows that the average UK house price in August 2025 was about £273,000, up 3 percent on the year.
Source: HM Land Registry – UK House Price Index August 2025
This means that affordability is still stretched, particularly when combined with higher deposit requirements and stricter affordability checks.
Borrowers on standard variable rates
Anyone currently on an SVR is likely to benefit most from switching. With SVRs above 7 percent in many cases and fixed deals available in the 4 to 5 percent range, there can be large savings from remortgaging, subject to fees and eligibility.
Should you fix now or wait
Whether to fix now or wait for potential future rate cuts depends on risk tolerance and personal circumstances.
Financial journalists and mortgage analysts note that markets expect Bank Rate to fall gradually over the next few years if inflation continues to ease, but there is no guarantee on timing. Lenders have already priced some of these expectations into current fixed rates.
Sources:
- MoneySavingExpert – Base rate held at 4% and what it means
- HomeOwners Alliance – Mortgage rate forecasts
In practical terms:
- Fixing now offers certainty. You know exactly what you will pay each month, which can help with budgeting.
- Waiting and using a tracker or short-term deal could pay off if rates fall faster than expected, but it also exposes you to the risk that rates stay higher for longer.
Key questions to ask before deciding
- How long do you plan to stay in the property
- Can you afford higher payments if rates do not fall as quickly as markets expect
- Are you currently on an expensive SVR that could be reduced immediately by remortgaging
- Do you value payment certainty more than the possibility of slightly lower rates later
The bottom line
The Bank of England's 4 percent base rate marks a pause, not a return to the ultra-low interest world of the 2010s. Inflation is lower but still above target, and mortgage rates, while down from their peak, remain significantly higher than a few years ago.
For many borrowers, the biggest risk is doing nothing and drifting onto a high standard variable rate. Reviewing options several months before a current deal ends, comparing two-year and five-year fixes, and taking independent advice can make a meaningful difference to long-term costs.
In this environment, informed decisions matter more than trying to perfectly time the interest rate cycle.
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