Your Future Plans

Over the last year or so, Mortgage Rates have broadly improved. And, the Base Rate has now been reduced to 4.5%, at the Bank of England’s February 2025 meeting.

Elsewhere, other factors have come together to help create a more encouraging environment, despite the heightened economic uncertainty in the world.

Annual inflation currently sits at 2.5%, which is much lower than the sizeable 11.1% back in October 2022. Although the Bank of England expects it to increase to 3.7% by Q3 2025 (partly due to energy prices), before reducing again.

Also, UK house prices continue to show increases (up annually by 4.1%).
(Sources: Office for National Statistics, CPI, 15 January 2025; Nationwide, House Price Index, January 2025; Bank of England, 6 February 2025)

Base Rate reduction of 0.25%

Those on Tracker deals are likely to see an immediate benefit in their monthly payments.

Those on Fixed Rate deals will not see any change to what they pay, until they come to the end of their deal period. But the rate drop might impact future deals on offer.

Those seeking a mortgage, or looking to remortgage onto a new deal may benefit from lenders responding to the lower rate.

Lender Rates

In recent times, we’ve had yo-yo periods with regard to the rates on offer.

And whilst the ‘average’ fixed rates for a 2-, or 5-year deal currently start with a ‘5’, better rates that begin with a low ‘4’ may be on offer. This is generally applicable to loans of 60%, or less, than the value of the property.

Whatever your situation, it’s likely that the comparative rate for those coming off 2-, and 5-year deals, will result in a bit of a price shock, although not as bad as it would have been a number of months back.
(Source: moneyfactscompare.co.uk, February 2025)

To some extent the fluctuating rates are due to the impact of Swap Rates, which have more of an influence on the pricing of Fixed Rate mortgage deals than the Base Rate.

Predictions for 2025

Base Rate – in December 2024, the governor of the Bank of England has indicated that, contingent upon economic conditions, they may reduce interest rates by approximately one percentage point over the course of 2025. Possibly via four quarter-point reductions.

Uplift in mortgage lending – according to UK Finance, there may be an 11% annual growth in gross mortgage lending in 2025, echoing the improving climate.

House prices – Nationwide is predicting a 2-4% annual growth in 2025, with Halifax expecting a 0-3% rise.

Of course, the UK is not immune to geopolitical events throughout the world, and these could, ultimately, result in a knock-on effect to mortgage rates.

And let’s not forget the impact of the Budget…
From April 2025 will see the introduction of most of the Budget initiatives, which were designed to help deliver an extra £70bn of annual spending.

To meet the extra spending plans, £36bn will come via higher taxes, with the following being the main areas targeted:

National Insurance (for employers)
Around £25bn is expected to come from an increase in Employer NI contributions, applicable from April 2025.

Stamp Duty
For those buying an additional home (such as landlords), the 3% surcharge they already faced was lifted to 5%, with immediate effect.

Also, after a period of reduced Stamp Duty charges, all purchases will return to the normal rates from 1 April 2025.
Stamp Duty is applicable to England and Northern Ireland.

Capital Gains Tax (CGT)
The sale of shares and assets now face the same higher CGT bands as those applicable to additional homes. On 30 October 2024, they increased from 10% to 18% for basic rate taxpayers, and 20% to 24% for those on a higher rate.

Inheritance Tax
The current thresholds will remain as is, but will be frozen at that level for a further two years, until 2030, drawing more into the net.

Income Tax
This is untouched, but the thresholds at the moment are frozen until 2028, creating a fiscal drag (as it generates a bigger tax take as incomes rise). But from 2028/29, the thresholds will then rise in line with inflation.
(Sources: HM Treasury, October 2024; Office for Budget Responsibility, Economic & Fiscal outlook, October 2024)

Whatever your situation, we’d fully assess the suitability of the options on offer. And you can take comfort from the fact that we operate in this sector day-in day-out, plus have the qualifications and expertise to deliver advice that meets your needs.

The Financial Conduct Authority does not regulate taxation advice.

HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

You may have to pay an early repayment charge to your existing lender if you remortgage.

Your property may be repossessed if you do not keep up repayments on your mortgage.