Are mortgage rates going down? What the latest rate cut means for self-builders and renovators

Mortgage rates are starting to fall as the Bank of England cuts its base rate to 4.25%, the fourth reduction in less than a year.

This decision reflects easing inflation and aims to make borrowing more affordable across the housing market.

The shift is especially significant for those looking for a self build mortgage or renovation mortgage who may now access lower-cost loans after two years of elevated mortgage rates.

Why are mortgage rates going down?

The Bank of England’s decision to lower the base rate comes as inflation shows signs of sustained cooling.

A more stable economic environment has given the BoE space to continue easing borrowing costs without risking a return to price instability.

Bradley Post, Managing Director at tax refund specialists RIFT, commented: “A second consecutive cut to the base rate already this year will come as welcome news if you’re a borrower, particularly for those households who are continuing to feel the pinch where the cost of living is concerned.

"Of course, whilst it may mean that we’re paying less when it comes to our mortgages or other finance agreements, it does mean that the interest accrued on our savings pots will weaken and this won’t be as warmly welcomed by those trying to form a nest egg.”

Bradley Post

Bradley Post is the Managing Director of RIFT Group, where he focuses on helping workers, particularly in construction, navigate financial challenges. With expertise in tax and borrowing, he frequently shares insights on the mortgage market and cost of living issue.

How are lenders responding?

Lenders have already started adjusting their offerings. Nationwide has announced changes to come into effect from 20 May 2025, including:

• A cut to its Standard Mortgage Rate (SMR) from 7.24% to 6.99%
• A drop in its Base Mortgage Rate (BMR) from 6.50% to 6.25%

Stephanie Daley, Director of Partnerships at mortgage advisors Alexander Hall, says the market is responding positively: “We’ve seen a consistently strong level of mortgage activity develop since interest rates stabilised and a second cut so far this year will only boost confidence in the market even further.

"The good news for homebuyers and remortgagers is that lenders have already been reacting positively to this greater degree of mortgage market stability and over the last month we’ve seen rate drops across all loan-to-values on both residential fixed rates and BTL rates."

Stephanie Daley

Stephanie Daley is the Director of Partnerships at Alexander Hall, where she advises lenders on technical product development and criteria, helping them introduce or expand offerings in the intermediary mortgage market.

What does this mean for self-builders and renovators?

For those planning self-build projects or home renovations, falling mortgage rates mean better affordability and potentially improved access to funding.

While rates remain above pre-2022 levels, the downward trend may offer crucial breathing room in budgeting for major building works.

Tracker mortgage holders are already seeing monthly savings, while fixed-rate borrowers nearing the end of their terms may now refinance at lower rates.

Will mortgage rates continue to fall?

The key question remains: are mortgage rates going down further in 2025? Many experts believe more cuts could be on the horizon if inflation continues to ease and wage growth remains stable.

Jean Jameson, Chief Sales Officer at estate agents Foxtons, offered a bullish outlook: “Whilst a cut was widely expected today it will still fuel the property market momentum that has been building over much of the last year and, with interest rates now trending downwards, we can expect to see homebuyers acting with an even greater level of confidence over the coming months.

"Those coming to the end of a fixed term are also set to benefit and we’ve seen rates already start to fall in the lead up to today’s decision, with many lenders reintroducing sub-four percent mortgage products, driven by increased mortgage provider competition.”

However, Robert Sadler, Vice President of Real Estate at Excellion Capital, added: “It is certainly welcome news for real estate investors who have been concerned about high interest rates for some time now, but the sense of relief will go beyond investment and out into the wider market and economy, going some way to undoing the damage to confidence that has thus far been caused by the Labour government's policies."

Jean Jameson

Jean Jameson is the Chief Sales Officer at Foxtons, based in London, with over 20 years of experience leading high-performing sales teams in the property industry.

Robert Sadler

Robert Sadler has over 20 years of experience in debt advisory, lending, and real estate equity investment. He spent 14 years as a lender for banks. At Excellion Capital, he specialises in refinancing and debt restructuring.

Should you act now?

If you’re considering a self-build or renovation project, this may be the best opportunity in over two years to secure favorable lending terms.

House prices remain resilient, and the availability of sub-4% mortgage products - particularly for those with smaller deposits - gives buyers more flexibility.

With another possible rate cut expected later in 2025, locking in a competitive deal now could offer long-term savings.

As mortgage rates continue to shift, it's important to stay informed about the latest trends in buying a house, especially in light of ongoing mortgage rate increases.

Whether you're navigating the effects of mortgage rate rises or looking ahead to potential changes in stamp duty, being proactive in your decision-making can help you make the most of current opportunities.

For more information on these topics, explore our detailed guides on buying a house, understanding stamp duty, and staying ahead of mortgage rate changes.