For many households, UK mortgage affordability in August 2025 has brought a bittersweet mix of good news and tough realities. Mortgage rates have finally started to nudge down, yet the relief for borrowers in the residential mortgage market has been slow to arrive. Earlier this month, the Bank of England trimmed its base rate from 4.25% to 4%—the first cut in some time—but economists now think the next move might not come until 2026. That’s because inflation, while easing, is still stubborn enough to keep policymakers cautious.
In the UK mortgage affordability picture, two-year fixed rates are now averaging around 5%, slightly cheaper than five-year deals at just over 5%. It’s the first time since 2022 that shorter-term fixes have had the edge, but experts are warning not to expect a rapid fall from here. This means borrowers are still feeling the squeeze. Around 3.6 million homeowners—roughly 41% of all mortgage holders—are seeing their monthly payments rise as they come off old low-rate deals. For the average household, that’s an extra £107 a month to find. On the flip side, about 2.5 million will see costs go down, depending on the timing and terms of their current deals.
Market Signals in the UK Residential Mortgage Sector
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The UK residential mortgage market is showing mixed signals. In July, demand jumped 11% and sales rose by 8%, but more homes have also come onto the market, which is keeping price rises in check. Rightmove and Zoopla are predicting only modest growth—about 1–2%—for the rest of 2025. The latest RICS housing market survey suggests that, beneath the surface, buyer confidence is starting to cool, with fewer new inquiries and a dip in completed purchases. The uncertainty around interest rates and potential tax changes in the autumn budget is making some would-be buyers pause for thought.
Government Support for UK Housebuyers
Against this backdrop, the government has been busy introducing support for UK housebuyers to tackle mortgage affordability challenges. Lending rules have been relaxed so more people can borrow above 4.5 times their income—a change in high loan-to-income (LTI) lending that the Bank of England says could help around 36,000 extra first-time buyer mortgages each year. Santander has gone further, lifting its borrowing cap by up to 24% for higher earners with a 10% deposit—something the bank has branded “the year of the buyer.” On top of that, Chancellor Rachel Reeves has made the government’s 95% mortgage guarantee scheme permanent, allowing buyers with just a 5% deposit to secure a home.
The bigger challenge—building enough affordable homes—remains. In the 2025 Spending Review, ministers pledged £39 billion over ten years for social and affordable housing, with £10 billion for Homes England and almost £1 billion for temporary accommodation. But progress has been uneven: London, for example, is building at the slowest rate in the country. Even with reforms to the Right to Buy scheme to help councils keep more of the proceeds and replace sold homes, turning these plans into bricks and mortar will take time.
Remortgage Outlook in Autumn 2025
For those planning to remortgage in autumn 2025, the outlook is one of cautious optimism. Rates have edged down slightly, and if your loan-to-value ratio has improved, you may be able to secure a better deal than you could earlier in the year. However, with base rate cuts likely to be slow, many borrowers will find that remortgaging is more about preventing large payment jumps than finding rock-bottom rates. Knowing how to remortgage to reduce payments—from timing your application to securing a rate early—could make a noticeable difference.
What It All Means for First-Time Buyers and Remortgagers
For first-time buyers in the UK, the current market offers more options thanks to looser lending rules, higher LTI allowances, and the permanent mortgage guarantee scheme. This combination makes it easier to buy with a small deposit and could help secure the best mortgage rates for first-time buyers UK, especially if you shop around. The trade-off is that borrowing more when rates are still relatively high can mean stretching monthly budgets.
For those looking to remortgage in 2025, the main focus is on avoiding steep payment increases as older, cheaper deals expire. While the remortgage outlook for autumn 2025 suggests some improvement, big savings will depend on timing and your financial position. The best deals will go to borrowers with strong credit scores and lower LTV ratios.
For both groups, supply is still the sticking point. Government policy may make borrowing easier, but without a significant increase in UK housing supply, competition for homes will remain intense. Buyers who are mortgage-approved and ready to move quickly will be in the strongest position.
FAQs on UK Mortgage Affordability, Autumn 2025
Q: How will UK mortgage rates change in autumn 2025?
A: Mortgage rates in the UK may fall slightly in autumn 2025, but most experts expect only gradual reductions. The Bank of England’s base rate cut to 4% in August is unlikely to be followed by major drops until 2026, meaning rates will remain higher than pre-2022 levels.
Q: What does the mortgage guarantee scheme mean for first-time buyers?
A: The UK’s permanent 95% mortgage guarantee scheme allows first-time buyers to purchase a home with just a 5% deposit. This reduces the upfront savings needed, but repayments may still be high if interest rates stay elevated.
Q: How can I remortgage to reduce payments?
A: To remortgage and lower your payments, start the process early—ideally six months before your current deal ends—compare offers from multiple lenders, and improve your loan-to-value ratio if possible. Lower LTV borrowers typically access the best rates.
Q: Will UK housing supply improve in 2025?
A: The government has pledged £39 billion over ten years for affordable housing, but building rates remain slow—especially in London. Most analysts expect only modest supply improvements in 2025, keeping competition for homes high.
Q: Is now a good time for first-time buyers in the UK?
A: For some first-time buyers, looser lending rules and the mortgage guarantee scheme make now a more accessible time to buy. However, with limited housing supply and relatively high interest rates, affordability will remain a challenge through autumn 2025.
Sources - for further reading
- What’s happening with UK house prices? Latest property market moves and forecasts – MoneyWeek
- Millions of homeowners to see mortgage payments rise – MoneyWeek
- Bank of England rolls out looser mortgage rules to help first-time buyers – The Guardian
- Rachel Reeves announces permanent 95% mortgage guarantee scheme – MoneyWeek
- Will the spending review 2025 mean more new affordable housing? – The Times
- Housing market cools amid fears over tax rises in autumn budget – The Times