Market Update January 2025

 

The new year has begun with a steadier backdrop for the UK mortgage market. The Bank of England ended 2025 by cutting Bank Rate to 3.75% (18 December 2025), reflecting growing confidence that inflation pressures are moderating while still keeping a cautious tone on the pace of future reductions. With the next decision due on 5 February 2026, markets are starting the year focused on “direction of travel” rather than sudden moves.

 

For mortgages, the bigger story remains in the money markets. Swap rates which heavily influence fixed-rate pricing have broadly stabilised at lower levels than much of last year. As a reference point, 5-year GBP swap levels have been around the high 3% range in early January, supporting lenders’ ability to price more competitively. As a result, many lenders have continued to edge fixed-rate deals down and widen availability, with pricing improvements most noticeable where competition is strongest. Industry commentary in early 2026 also notes average fixed rates easing versus earlier periods, helped by competitive cuts from major lenders.

 

Housing activity is also starting the year on a more stable footing. Mortgage approvals and enquiry levels remain resilient, and while affordability pressures have not disappeared, greater clarity around the likely direction of interest rates is helping confidence to rebuild. Overall market conditions appear more supportive than they were a year ago, as pricing pressures ease and both borrowers and lenders look ahead with increased certainty.

 

For anyone with a mortgage deal expiring in the next 6–9 months, this environment still rewards planning ahead. Securing a new rate early can lock in today’s improved pricing and many lenders continue to allow clients to switch to a better product if rates fall further before completion.