UK Economy Slows but
UK Mortgage Rates Are Falling. Why?

The UK economy is losing momentum, yet fixed mortgage rates have paradoxically been edging lower. The reason: markets expect easier Bank of England (BoE) policy as inflation cools, pulling down government bond (gilt) yields and the SONIA swap rates lenders use to price fixed deals. That gives lenders scope to trim pricing in parts of their ranges.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What’s driving the fall in fixed mortgage rates?

Inflation has surprised on the soft side. CPI inflation held at 3.8% in the year to September 2025, defying expectations of a rise. Softer inflation reduces the need for higher future interest rates, which typically lowers swaps and gilt yields.

Markets are leaning toward further easing. Following the CPI release on 22 October 2025, traders increased bets on BoE cuts; gilt yields fell to multi-month lows as rate-cut odds rose. Fixed mortgage pricing often follows these market moves.

The BoE has already started to cut. Bank Rate was reduced to 4.00% on 7 August 2025 (from 4.25%) and held there in September; the next MPC decision is scheduled for 6 November 2025. Markets price the future, so mortgage rates can move before BoE changes.

SONIA swaps—the plumbing behind fixes—have eased. Indicative mid-market SONIA swap and gilt screens show lower levels versus the summer; these are key inputs to fixed-rate pricing.

What lenders have been doing

Lenders have reduced rates in steps where funding and appetite allow. For example, Nationwide announced selective reductions (up to 0.18%) across parts of its range effective 19 September 2025. Lenders also passed through August’s Bank Rate cut to trackers and standard variable rates for affected customers. (Product availability and pricing change frequently and remain subject to eligibility and affordability.)

What this means for different borrowers

First-time buyers: Slightly lower fixed rates can improve monthly budgeting, but deposit size, credit profile and income multiples still drive outcomes. Explore first-time buyer mortgages and income multiples explained.

Remortgagers: If your deal ends within 6 months, it can be sensible to review options now; many lenders allow a product switch if pricing improves before completion. See our remortgage guidance and broader mortgage services.

Home movers: Lower swaps can make medium-term fixes more competitive. Our step-by-step mortgage guide can help plan your timeline.

Buy-to-let landlords: Pricing is more criteria-driven (rental coverage stress tests, ICR, property type). Start with our buy-to-let mortgage guide and, for SPVs, limited company BTL.

If you want to understand how today’s moves affect you, speak to a qualified mortgage adviser at Mortgage One.

Key numbers

• Bank Rate: 4.00% (cut on 7 Aug 2025; held on 17 Sep 2025)

• Next MPC decision: 6 Nov 2025

• CPI inflation: 3.8% (year to Sep 2025, published 22 Oct 2025)

• Market reaction: Gilt yields fell and rate-cut odds increased after the CPI release

• Example lender action: Nationwide cuts up to 0.18% (effective 19 Sep 2025); tracker/SMR adjustments followed the August Bank Rate cut

As at 31 October 2025, London. Markets and pricing may change at short notice.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. For tailored advice specific to your circumstances, please contact Mortgage One directly.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority

FAQs

1. If the economy is weak, why don’t mortgage rates go up?
Because fixed mortgage rates reflect expectations for future interest rates and funding costs. Softer inflation and weaker growth lower gilt yields and SONIA swaps, giving lenders room to trim fixed-rate pricing.

2. Will the BoE cut again soon—and should I wait?
The MPC decides next on 6 November 2025. Markets expect gradual easing, but outcomes can surprise. If a deal today suits your needs and budget, waiting for potential cuts carries the risk of market moves or criteria changes.

3. Are five-year fixes usually cheaper than two-year fixes when cuts are expected?
Often yes—when the swap curve implies lower rates in the medium term than the near term—but the curve shifts. Compare quotes and total cost (rate plus fees).

4. Why haven’t all lenders cut at the same pace?
Each lender’s funding, pipeline and risk appetite differ. Many have reduced selectively (e.g., Nationwide in September), and may adjust again as swaps move.

5. Do tracker and SVR rates fall with fixed rates?
Trackers and many SVRs follow Bank Rate, not swaps. They fell after the BoE’s August cut to 4.00%, but they won’t move unless the BoE changes Bank Rate.