Over the past 12 months, interest rates have played a pivotal role in shaping the UK property market. Following an unprecedented period of rapid increases throughout 2022 and early 2023, the Bank of England has since adopted a more cautious and stabilising approach in response to changing inflationary pressures and economic uncertainty. As we move through the second half of 2025, both homeowners and investors are keenly watching for any signals about the direction of monetary policy and what it might mean for the housing sector.
Where Are Interest Rates Now?
As of July 2025, the Bank of England base rate sits at 4.25%, unchanged since early spring. After peaking at 5.25% in late 2023, the Monetary Policy Committee (MPC) began gradually trimming the rate as inflation showed signs of slowing. The steady decline in headline inflation—down from 10.1% in March 2023 to around 3.2% today—has reduced the urgency for aggressive tightening, allowing the Bank to begin cautiously easing the pressure.
Although rates remain historically high compared to the ultra-low levels seen in the 2010s, stability in recent months has brought a level of predictability back to the housing and mortgage markets.
The Last 12 Months: Cooling and Adjustment
The sharp rise in interest rates from late 2022 into mid-2023 had an immediate and dramatic effect on the housing market. Mortgage affordability was stretched, borrowing costs surged, and buyer sentiment cooled. Lenders responded by tightening affordability checks, while buyers recalibrated their budgets. As a result, house price growth slowed significantly and, in some regions, declined modestly.
In areas such as Four Oaks, Sutton Coldfield and parts of North Birmingham generally, where property values and average mortgages are higher, the impact was particularly noticeable. Many would-be buyers adopted a “wait and see” approach, while some existing homeowners faced difficult remortgage scenarios as fixed-rate deals expired and monthly repayments increased.
However, by early 2024, the market began to show signs of recalibration. Sellers became more realistic on pricing, demand stabilised, and mortgage lenders introduced more competitive products, particularly for five-year fixes. While transaction volumes remained below the five-year average, the sense of panic that characterised late 2022 had dissipated.
The Current Mood in the Market
Now, midway through 2025, confidence is returning—albeit cautiously. Buyers and sellers are becoming more accustomed to a “new normal” in mortgage rates, with many lenders now offering five-year fixed deals in the 4.5–4.75% range, and some dipping below 4% for those with larger deposits.
Mortgage Rates:
These vary depending on factors like loan-to-value ratio, term, and whether the rate is fixed or variable. For example, a 2-year fixed rate mortgage with a 75% LTV is around 4.34%, while a 5-year fixed rate with the same LTV is about 4.38%
This period of relative rate stability has encouraged both first-time buyers and existing homeowners to re-engage with the market. Here at Acres this Spring and early Summer we have seen increased viewing numbers and sales, with lenders are seeing improved levels of mortgage approvals compared to this time last year. While the market remains harder there is renewed movement and signs of recovery.
The Next 12 Months: What Lies Ahead?
The key question now is: where do rates go from here?
Market analysts are broadly expecting further, gradual base rate reductions over the next 12 months—provided inflation continues to decline and wage growth remains contained. Some forecasts suggest the base rate could fall to 4.0% or even 3.75% by mid-2026, depending on economic performance and global trends.
Such a move would be welcomed by borrowers and could help to stimulate more activity in the housing market, particularly among first-time buyers. However, policymakers remain cautious. The Bank of England has been clear that any loosening of monetary policy will be measured, to avoid reigniting inflationary pressures or creating instability in the financial system.
Additionally, geopolitical factors—including wages increases, global trade disruptions, and energy markets—may yet play a role in shaping economic policy and, by extension, interest rates.
Implications for the Property Market
If rates begin to fall incrementally in 2026, the property market is likely to respond positively. We could see a modest rise in house prices, particularly in more affordable regions where affordability metrics are more favourable. Increased mortgage availability and improved sentiment could bring more stock to the market, improving supply-demand balance.
That said, we’re unlikely to return to the heady price growth of the early pandemic years. What we can expect is a more sustainable, steady market—driven by real demand, realistic pricing, and better-aligned borrowing costs.
Final Thoughts
Interest rates remain a vital factor in the health of the property market. After 18 months of volatility, the outlook is becoming clearer, though challenges remain. For buyers, sellers, and investors alike, the next 12 months offer an opportunity to engage with a market that is stabilising, supported by more predictable economic conditions and a cautious but constructive monetary policy environment.
Staying informed—and seeking advice from trusted mortgage and property professionals—will be essential as we move into what appears to be a calmer, more balanced phase for housing.
Want more tips and advice? We love being able to help! Acres Estate Agents are your local, family owned and run property experts for the Sutton Coldfield and Great Barr areas. Call your local office on the numbers below or email This email address is being protected from spambots. You need JavaScript enabled to view it. to find out how we can help you.
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If you would like to discuss selling your home, please get in touch with us This email address is being protected from spambots. You need JavaScript enabled to view it. or call any of our busy, helpful teams/offices:
Four Oaks 0121 323 3088
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Thank you for reading this article, and your interest in Acres and our property for sale.
Nigel & Jayne Deekes – Acres Partners
