Will mortgage rates fall this year?

The Cedar Crest Team
May 7
1 min read

Persistent inflation or global economic shocks could disrupt plans for rate cuts

The UK's mortgage holders and prospective homeowners will closely monitor interest rates

throughout 2025, hoping for a decrease in borrowing costs after a prolonged period of high rates. The Bank of England, which has been overseeing inflation and economic growth, recently provided some insight into its policy direction and outlook. But what does this mean for mortgage rates? Will variable-rate mortgage holders find any relief?

INTEREST RATES AND THEIR FUTURE TRAJECTORY

The Bank of England’s Bank Rate was maintained at 4.5% during the Monetary

Policy Committee (MPC) meeting in March. While the Bank observes significant progress in reducing inflation from its 11% peak in late 2022, uncertainties remain. The Consumer Price Index (CPI) inflation is still above the 2% target and is projected to temporarily rise to 3.7% by the third quarter of this year. This trajectory, influenced by fluctuations in global energy prices and domestic policy decisions, has prompted a more cautious approach regarding further rate cuts.

Encouragingly, there have already been three reductions in the Bank Rate since late 2024—from 5.25% to 4.5% in March.

Looking ahead, experts predict that rates may gradually decrease further, provided inflationary pressures continue to ease and economic conditions remain stable.

However, this process is likely to be slow and deliberate, as the Bank seeks to balance inflation control with economic growth.

BROADER ECONOMIC CONTEXT

The UK economy continues to face challenges, including uncertain global trade policies, modest growth, and ongoing supply disruptions. Business investment and consumer confidence have remained subdued; however, the housing market

has shown signs of recovery.

According to the Bank of England, mortgage approvals have stabilised, and house price

growth is returning, albeit cautiously.

The Bank of England’s balancing act between stimulating growth and controlling inflation will be crucial in shaping the interest rate environment. The MPC’s approach remains data-driven, with every decision influenced by factors such as employment rates, domestic spending, and global market developments.