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The Bank of England has just reduced the Base Rate to 4.25% (as of 8 May 2025)— a small but welcome shift for homebuyers, movers, and those looking to remortgage. It's the second cut this year and a sign that things could be easing a little in the mortgage world.
At JW Wood, we know mortgage changes can raise lots of questions. That’s why we’re breaking down what this means for you—whether you’re planning to move, buy your first home, or review your current deal.
Why Has the Base Rate Been Cut?
The Bank of England adjusts the Base Rate to help keep inflation steady (around 2%). With inflation falling to 2.6% in March, the Bank decided to give the economy a gentle boost by lowering the rate—making borrowing slightly more affordable for households and businesses.
Many experts think we could see two or three more cuts before the end of 2025, possibly bringing the Base Rate down to around 3.75%.
What Does This Mean for Mortgage Rates?
Mortgage rates have been slowly dropping, and this trend could continue. While lenders don’t always reduce rates straight away, we’re already seeing signs of improvement.
Most competitive rates available now:
2-year fixed: 3.72%
5-year fixed: 3.78%
We expect more lenders to adjust pricing soon—so it’s a great time to explore your options.
Rates by Deposit Size (Loan-to-Value - LTV)
The more deposit you have, the better rate you’re likely to get. Here’s a quick overview:
For Smaller Deposits (5–10%):
95% LTV, 2-year fixed: 5.39%
90% LTV, 5-year fixed: 4.79%
For Mid-Range Deposits (15–25%):
85% LTV, 2-year fixed: 4.58%
75% LTV, 5-year fixed: 4.41%
For Larger Deposits (40%+):
60% LTV, 2-year fixed: 4.01%
60% LTV, 5-year fixed: 4.06%
(These are based on deals with a typical £999 fee.)
What Does It Mean for You?
If You’re on a Fixed-Rate Mortgage:
Nothing changes—for now. But if your deal is ending soon, it’s smart to start comparing rates early. Some lenders let you lock in a new deal up to six months in advance.
If You’re on a Tracker or Variable Rate:
Good news! Your payments will likely go down, depending on your lender and the terms of your deal.
If You’re Looking to Buy or Remortgage:
Now could be a great time to review your options. Even a small drop in mortgage rates can make a big difference to your monthly payments. Example: A first-time buyer purchasing at £228,551 with an 85% LTV 5-year fixed mortgage might now pay around £1,085/month.
Could This Help with Affordability?
Possibly! Lenders assess affordability using stress tests that include their standard variable rates (SVRs). As the Base Rate comes down, SVRs may follow, easing the borrowing criteria a little.
That said, SVRs are still high, averaging around 7.5%, so it’s crucial to avoid falling onto one once your fixed term ends.
What’s Next?
The next Base Rate review is scheduled for 19 June 2025. While we’re not likely to see the ultra-low rates of 2021 return, the outlook is cautiously optimistic.
We’re Here to Help
At JW Wood, we want to make sure you feel confident and supported with every step of your home journey. If you're thinking about buying, moving, or switching your mortgage, we can connect you with trusted mortgage advisors who'll help you find the right deal for your needs.
Get in touch with your local JW Wood branch today. We’ll be happy to answer your questions, talk through your options, and help you make the most of today’s changing market.
Adapted from Rightmove