Homeowners across the UK are bracing for a prolonged period of high mortgage rates, as Chancellor Rachel Reeves confirmed in her Spring Statement that inflation is now projected to average 3.2% in 2025 — a notable increase from the 2.6% previously forecast by the Office for Budget Responsibility (OBR).
This upward revision to the inflation outlook has prompted speculation that the Bank of England will be slower in reducing interest rates, impacting borrowing costs for millions of households.
Interest Rates Hold Steady Amid Global Uncertainty
Despite recent reductions, the Bank of England opted to keep its base interest rate steady at 4.5% this month, citing heightened global economic uncertainty. While this marks the lowest rate in over 18 months — following a cut from 4.75% in February and the third drop since August 2024 — there is little indication of an aggressive downward shift in the near term.
Inflation, measured by the Consumer Price Index (CPI), stood at 2.8% in the 12 months to February 2025, down slightly from the month before. Although far below the October 2022 peak of 11.1%, CPI remains above the Bank of England’s 2% target.
Justin Moy, managing director at EHF Mortgages, told The i Paper: “Those looking for a quick cut to mortgage rates will be disappointed by Wednesday’s statement. With no additional support for homeowners, the mantra ‘higher for longer’ will rattle mortgage borrowers for the next few years.
“Confidence and stability still need to be proven by the government, the economy has a number of tax rises to swallow and if growth goes into reverse, that would be the trigger for deeper cuts to rates. But in the meantime, there isn’t a lot of cheer for mortgage holders.”
Critics were quick to respond, including shadow chancellor Mel Stride, who said: “Inflation, which was down to 2% bang on target on the very day of the last general election under a Conservative government. We are now told this year we’ll be running at twice the level of the forecast under ourselves in 2024. This is going to mean prices bearing down on households and on businesses, right across the country, because of her choices.”
Mark Harris, chief executive of mortgage broker SPF Private Clients: “The spring statement was underwhelming as far as the housing market is concerned.
“The chancellor missed an opportunity to boost all-important transactions by extending the stamp duty concession or introducing some discount for downsizers.
“She also did nothing for first-time buyers, with no incentives or assistance to get them on the housing ladder — a significant shame as first-time buyers are the lifeblood of the market and enable existing homeowners to move up the ladder.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Our first wish was granted — the chancellor didn’t do much, if anything, to deter existing activity in the housing market.
“It also seems a little unfair on those who have moved heaven and earth to take advantage of the stamp duty concession before it disappears but who may not make it, through no fault of their own. The deadline could perhaps have been extended for those transactions in solicitors’ hands from the beginning of February as a small respite.
“Looking forward, a broader review into the impact of stamp duty on the market and making it less of a deterrent, particularly at the first-time buyer end, would have been welcome.”
Mortgage Market Outlook: Rates Remain High
According to data from Uswitch, average mortgage rates currently sit at:
- 5.19% for a two-year fixed-rate deal
- 5.31% for a five-year fixed-rate deal
These rates are unlikely to see significant reductions in the short term, especially in light of the inflation forecast.
Spring Statement Offers Little for Buyers
The Chancellor’s Spring Statement brought no new support for the housing market:
- No extension of the stamp duty relief, which is due to expire this week
- No introduction of new mortgage support schemes for first-time buyers
With affordability already strained, prospective homeowners are left with few incentives or safety nets.
Mortgage Deals Snapshot – March 2025
Here’s a look at the current mortgage offerings from major UK lenders:
HSBC
- Five-year fix: 4.07% (3.98% for Premier Standard clients)
- Two-year fix: 4.12% with £999 fee
- 95% LTV options:
- Two-year fix at 5.39%
- Five-year fix at 5.08%
Note: These rates assume a 60% LTV, except where stated.
NatWest
- Five-year fix: 4.12% with £1,495 fee
- Two-year fix: 4.15%
- Deposit required: Minimum 40%
Santander
- Five-year fix: 4.10% with £999 fee
- Two-year fix: 4.15%, same fee
- New offerings:
- First-time buyer products for 60%–95% LTV
- Two-, three-, five-, and ten-year terms
- Flexible fees: £999 or £0
- Special products for new-build purchases
- High-value loans at 60% LTV with £1,999 fee
Barclays
- Five-year fix: 4.06% (3.99% for Premier clients)
- Two-year fix: 4.11%
- New initiative – Mortgage Boost:
- Allows joint applications with family/friends
- Increases borrowing capacity without gifting or additional deposits
Example:
A single buyer earning £37,500 with a £30,000 deposit could borrow £168,375. With a second applicant earning the same, borrowing could increase to £270,000.
Nationwide
- Five-year fix: 4.34% with £999 fee (40% deposit required)
- Two-year fix: Also 4.34% with same conditions
Halifax
- Five-year fix: 4.17% (up from 4.12% last week)
- Two-year fix: 4.06% for first-time buyers
- Ten-year fix: 4.78%
- New offering: 1.5-year fixed-rate remortgage product
Cheapest Mortgage Deals (As of March 2025)
| Lender | Term | Rate | Deposit Required |
|---|---|---|---|
| Barclays | 5-Year Fix | 4.06% | 40% |
| Halifax | 2-Year Fix | 4.06% | 40% |
Note: Sub-4% mortgages are currently reserved for premium clients.
Given that the average UK house price is now around £366,189, a 40% deposit translates to nearly £147,000 — putting these “best rates” out of reach for many first-time buyers.
Shift Towards Longer Mortgage Terms
A growing number of UK homeowners are opting for longer mortgage durations, with some stretching repayment periods to 35 years or more, especially among older borrowers.
Innovative Lending Approaches
- April Mortgages: Offering up to 6x income on five- to 15-year fixes, with rates starting from 5.20% and a low £195 application fee. Minimum deposit: 5%.
- Skipton Building Society: Lending up to 5.5x income to support first-time buyers.
- Leeds Building Society: Also expanding to 5.5x income multiples for households earning at least £40,000 annually.
Looking Ahead
With 1.8 million fixed-rate mortgages due to expire in 2025, pressure is mounting on the Bank of England to accelerate rate cuts. However, with inflation still running above target, policymakers face a delicate balancing act between easing borrower pain and maintaining economic stability.
