As UK mortgage rates creep back up due to lender caution, many prospective homebuyers are pausing their plans.
With growing uncertainty around the upcoming Autumn Budget 2025, average mortgage interest rates have risen month-on-month for the first time since February. Lenders are approaching the winter cautiously, currently, the average rate for both two and five-year fixed-rate mortgages stands at about 5% – still significantly lower than the peak rates of recent years. Analysts suggest that further Bank of England base rate cuts are unlikely in the short term.
Rates fluctuate depending on the BoE base rate and overall economic market conditions, and today’s figures remain far below those from two years ago, when the average rate for a two-year fix was 6.67%.
According to data from Moneyfacts, mortgage rates only rose slightly in the past month – by just 0.02 percentage points. That puts the current average two-year deal at 4.98% and five-year fix at 5.02%. With more than 80% of mortgage holders on fixed deals, these slight increases won’t affect most homeowners until their current term ends.
Rachel Springall from Moneyfacts commented, “Volatile swap rates and a cautionary stance from lenders have caused a pause in the downward trend of mortgage rates.” Swap rates mirror market expectations for future interest rate changes, and lenders use them to set their pricing.
Simon Gammon, managing partner at Knight Frank Finance, added, “Lenders have responded cautiously, nudging some rates higher. It’s more of a plateau than a trend toward rising borrowing costs – a holding pattern while the outlook clarifies.”
https://moneyfactscompare.co.uk
The Housing Market’s Reaction
The effect on the UK housing market has been typical. As buyers observe others hesitating, they too tend to delay their decisions. This dip in buyer activity often leads to suppressed property prices due to weakened confidence. Ironically, this is why some property experts are calling this period, before the Autumn Budget and year-end, the ideal window to buy a house.
Once the budget is revealed, certainty will likely return. But with the announcement scheduled so late in the year, buyer momentum may only resume after the holiday season. This potential post-Christmas property surge could push prices higher, making now a potentially smart time for buyers seeking value.
What Concerns Are There Over the Autumn Budget?
On Monday, the Institute for Fiscal Studies (IFS), an independent think tank, warned against “directionless tinkering and half-baked fixes” when trying to bolster the government’s finances.
Taxes are expected to rise in the Budget. The Chancellor is under pressure to increase revenue while adhering to self-imposed fiscal rules described as “non-negotiable.” The IFS estimates that tens of billions could be raised without breaching Labour’s election promises, but it won’t be easy.
The main rules:
- No borrowing to fund day-to-day public spending by the end of this Parliament.
- Government debt must fall as a percentage of national income.
In its 2024 general election manifesto, Labour vowed not to increase income tax, National Insurance, or VAT for working people. However, the IFS says the remaining options are limited and politically sensitive.
Possible Tax Reforms on the Horizon
Among the more viable strategies, the IFS suggests:
- Doubling council tax on high-value homes (£4bn potential gain).
- Scrapping inheritance tax relief on primary residences (£6bn).
- Extending the income tax threshold freeze past 2028, which could generate “a significant amount.”
The think tank opposes introducing a wealth tax, citing practical concerns such as capital flight and penalties on savings. It also cautions against cutting pension tax relief, instead suggesting tweaks to the tax-free pension lump sum.
A Case for Smarter Tax Reform
The IFS’s views are part of its annual Green Budget report. It urges broader reform across the UK’s property tax system, including aligning tax rates across different income types for fairness and economic efficiency.
The IFS recommends reforms to stamp duty and council tax, calling them outdated and regressive. Director Helen Miller labelled stamp duty “an awful tax” and suggested modernising council tax by linking it to current property values. This, she argues, would be more equitable and less economically damaging than some current proposals.
She also noted that the previous budget’s National Insurance increase left “only losers.” A better approach, she said, would involve principled reforms that offer both revenue growth and fairness, even if tax hikes are necessary.
So, Is Now the Time to Buy?
Probably. A combination of stable mortgage rates, reduced buyer competition, and a temporary price dip in the housing market means this could be the best moment before a possible price surge post-budget. And while political and fiscal factors remain uncertain, smart buyers may find opportunity in the pause.
If you have property and want to sell quickly and efficiently, please get in touch with our team, who are always on hand to help.
