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A Word on the Mortgage Market – May 2025

A Word on the Mortgage Market

Welcome to the latest edition of A word on the mortgage market, which enters your inbox fresh on the heels of another cut in Bank Rate – which is nice. As you would expect, more on that to follow.

As we move into May, both central banks and mortgage lenders are making strategic moves in response to a shifting economic outlook. With rate decisions, economic warnings, and ongoing global uncertainty all playing a part, it’s a critical moment for borrowers and homeowners to stay informed. And that’s why we’re here.

As always, we hope you find A word on the mortgage market useful and informative. If you would like to discuss any of it and what it means for you then please get in touch with your consultant, whose details you will find towards the end of this note. Let’s jump in. Actually, before we do that, we just wanted to draw your attention to a piece at the end of this email on equity release. Please do make sure you have a look.

Bank of England Cuts Base Rate (Again).

The Bank of England’s Monetary Policy Committee (MPC) has voted to cut the base rate by 0.25%, following its previous reduction in February. That takes the rate to its lowest level since mid-2023, and it’s a sign that the Bank is taking inflation and slow economic momentum seriously.

There had been speculation of a larger 0.5% cut ahead of the meeting, and this smaller move still leaves the door open for further cuts in the coming months — especially if economic confidence continues to slide.

In contrast, the U.S. Federal Reserve held rates steady, opting to wait for clearer signs from the global economy before making any moves. But with global growth forecasts under pressure, the Fed may not stay on hold for long.

Lenders React. A Full-Blown Mortgage Price War?

The good news for borrowers is that we are now seeing clear signs of a mortgage rate war, with high-street lenders competing aggressively to attract new customers. HSBC has been at the forefront, launching several new rate cuts in recent days, and other banks are expected to follow.

There’s also a shift in the market dynamic: lenders have annual targets to meet, and with a slowdown in activity following March’s stamp duty changes, many are under pressure to stimulate demand. The latest Bank of England data shows net mortgage approvals fell for the third straight month, pointing to weaker buyer activity ahead.

Behind the scenes, swap rates (which as you know influence mortgage pricing) have been falling, giving lenders the breathing room to offer more competitive deals. At the time of writing, 5-year swaps stood at a respectable 3.6% (they were at 4% this time last year), and 2-year swaps also stood at 3.6% (significantly down from 4.5% this time last year).

Global Economic Trends. EU Growth Up, UK Caution.

The Eurozone economy grew by 0.4% in Q1 2025, double the pace of the previous quarter and above forecasts. Falling inflation, lower interest rates, and increased government spending in countries like Germany have helped support demand. Spain saw the highest quarterly growth at 0.6%, with Italy at 0.3% and Germany at 0.2%.

However, the threat of U.S. tariffs remains a key concern. New duties from Washington could reduce EU exports and dampen business investment later in the year.

Closer to home, a new report from the EY ITEM Club, which uses the Treasury’s economic models, has downgraded the UK’s growth outlook for 2025 and 2026. It warns that rising global uncertainty, high domestic inflation, and falling consumer confidence could cause a two-year delay in economic recovery.

The report also emphasised that further interest rate cuts may be essential to restore momentum — a message that echoes the Bank of England’s recent decision.

A Final Word on Equity Release.

We’re often asked about Equity Release — and yes, we advise on it. It requires specialist qualifications beyond standard mortgage advice, and our team is fully certified to help you understand the options.

Equity Release allows homeowners over 55 to unlock tax-free cash from their property without needing to move. Whether you need a lump sum or regular payments, it’s a way to improve cash flow in later life while still living in your home.

What clients use Equity Release for:

  • Clearing debts or interest-only mortgages
  • Paying for home improvements
  • Gifting money to children or grandchildren while they need it
  • Funding holidays, vehicles, or later-life care
  • Managing inheritance tax (IHT) exposure

Key features:

  • No monthly payments required (unless you opt to pay the interest)
  • No negative equity guarantee: you’ll never owe more than your property is worth
  • You retain ownership of your home and can live there for life
  • Portability: you can move and take your plan with you

Equity Release isn’t right for everyone — but for many of our clients, it’s opened up possibilities they didn’t think were available. If you’re curious, just get in touch. We’ll explain how it works and whether it’s a good fit for your needs.

To talk to us about this please send and email to info@mortgageforce.co.uk or call 01332 900789.

Please note

Seek advice from our specialist advisers within our organisation before your take a loan against your property, to be sure you weigh up your options. A lifetime mortgage can reduce the value of your estate and may affect your entitlement to means-tested benefits. Our advisers will guide you through this process who will act in your interest, help  you to avoid foreseeable harm and to help you achieve your financial goals.