The mortgage market is a hot topic right now, with a key question on many homeowners' minds: Should you fix your mortgage deal now, or is it better to wait, hoping for rates to fall further? Recent cuts to fixed mortgage rates have certainly grabbed attention, coming just ahead of the Bank of England's crucial decisions on the base rate. But how much further can fixed rates really drop, will they drop at all, and what’s the smartest move for you?

Understanding the Base Rate & Fixed Rates:

On Thursday, 8^th May, the Bank of England cut the base rate from 4.5% to 4.25%. This move has fuelled expectations of further cuts later in the year, with economists at Barclays, for instance, predicting the base rate could settle around 3.5% by early 2026.

While the base rate directly influences variable-rate mortgages (like trackers and Standard Variable Rates or SVRs), it also has a ripple effect on fixed-rate deals. However, it’s crucial to understand that fixed rates are primarily driven by long-term interest rate predictions and swap rates – not just the immediate base rate.

The Current Landscape: Where Are Fixed Rates Now?

Just a few months ago, in January, the landscape for fixed-rate mortgages looked quite different. The best two-year fixed deals for homebuyers were hovering around 4.2%, and five-year fixed rates were at approximately 4.07%.

Fast forward to today, and we’ve seen some positive shifts. The equivalent top two-year fixed mortgages are now around 3.88%, with five-year fixed deals at an even lower 3.83%. This downward trend is welcome news for borrowers.

Looking Ahead: Will Rates Continue to Fall?

So, what does the future hold? There’s cautious optimism that fixed rates will continue to edge downwards throughout the remainder of 2025. This hopeful outlook is largely driven by two factors: falling swap rates (which mortgages are indirectly linked to) and increasing competition among lenders eager to attract new business.

Experts currently anticipate leading two-year fixed rates could settle closer to 3.5% by the end of the year, with five-year deals not far behind.

However, it’s important to temper expectations. Most forecasts are not predicting a swift return to the ultra-low rates we saw in previous years, unless the Bank of England base rate drops considerably – which, at this stage, seems unlikely.

Fix Now or Wait?

This brings us back to the core dilemma. The truth is, nobody has a crystal ball. The mortgage market is incredibly dynamic, and what seems certain today can change rapidly tomorrow.

Given this inherent uncertainty, here’s a strategy many experts recommend:

• Secure a deal now, but keep it under review. Many mortgage offers allow you to lock in a rate for a period (e.g., 3-6 months). This protects you against any sudden upwards turn in rates, giving you peace of mind.
• Flexibility is key. If rates do continue to drop after you’ve secured a deal, you often have the option to switch to a lower rate with the same lender before your current deal completes, or even explore new offers from other lenders. This strategy offers the best of both worlds: protection and the chance to benefit from further reductions.

Ultimately, your decision shouldn’t be solely about chasing the absolute lowest rate. Consider what matters most to you:

• Certainty vs. Potential Savings: Are you comfortable with a slightly higher fixed rate now for guaranteed monthly payments, or are you willing to risk potential rate rises for the chance of a lower deal later?
• Your Personal Circumstances: How would a sudden increase in your mortgage payments impact your budget? For some, stability is paramount.

Final Thoughts:

Navigating the mortgage market can feel complex, but focusing on what provides you with the most stability and aligns with your financial goals is always the best approach.

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