Types of Mortgages Available in 2025

1. Fixed-Rate Mortgages

Fixed deals remain the most popular option in 2025. They offer predictable monthly payments and protect you from market fluctuations.

• Most common terms: 2, 5, and 10 years
• Best for: budgeting, certainty, long-term homeowners

If you think rates might fall further, a shorter fix can give flexibility — but a longer fix provides security.

2. Variable-Rate Mortgages

• Tracker: Follows Bank Rate + a margin. Good when Base Rate is falling.
• Discount: Temporary discount off lender’s SVR.
• SVR: Expensive fallback, avoid if possible.

In 2025, trackers are popular again because the market expects gradual rate cuts in 2026.

3. Government & First-Time Buyer Support

• 95% Mortgages: Continue through 2025 via major lenders.
• Shared Ownership: Buy a share and rent the rest — still used widely in London and SE.
• First Homes Scheme: Local homes for local buyers at 30–50% discount.
• Lifetime ISA Bonus: 25% government bonus remains a key tool for first-time buyers.

Note: Help to Buy remains closed for new applications, but existing agreements continue normally.

How Much Can You Borrow in 2025?

Lenders still calculate affordability using income multiples, but with stricter stress tests because of recent rate volatility.

• Standard income multiple: 4.0×–4.5×
• Enhanced borrower multiple: up to 5.5× (strong credit + low debt)
• Self-employed: average of last 2 years’ income usually required

Example: If you earn £50,000, a 4.5× multiplier gives a maximum borrowing of £225,000.

Affordability Factors in 2025

• Credit score & payment history
• Existing debts (credit cards, loans, car finance)
• Dependants & childcare costs
• Property type (new-builds often stricter)

2025 Mortgage Application Process

1. Check Your Credit Health

Fixing small credit issues early (late payments, high utilisation) can save thousands in interest.

2. Build Your Deposit

While 5% deposits are possible, 10–20% gives access to much better rates and more lenders. Improving your LTV is the biggest factor in lowering your rate.

3. Get a Mortgage in Principle

This tells estate agents you are financially credible and helps with property negotiations.

4. Submit Full Application

You’ll need:

• 3–6 months bank statements
• Payslips (or SA302 for self-employed)
• Deposit evidence
• Proof of identity

5. Valuation & Underwriting

The lender checks the property value and affordability before approving the offer.

6. Legal & Completion

Solicitors review contracts, searches and ownership structure. Once satisfied, you exchange and complete.

Remortgaging in 2025

Many 2-year fixes from the high-rate 2023/2024 period are ending in 2025, causing a wave of remortgage activity. With rates lower than during the peak, many households are seeing savings.

• Start shopping 3–6 months before fixed deal ends
• Avoid rolling to SVR (usually 6–8% range)
• Consider overpayments if you want to reduce term

Total Costs to Consider (2025)

One-Off Costs

• Arrangement fees: £0–£2,000
• Valuation: £250–£1,500
• Legal fees: £800–£2,000
• Broker fee: £0–£500 (many are free)

Ongoing Costs

• Insurance (buildings required, contents optional)
• Service charges & ground rent for flats
• Maintenance budgeting (1% of property value annually recommended)

Best Strategies for 2025 Buyers

1. Improve your credit profile — small fixes create big rate differences.
2. Increase deposit if possible — every 5% drop in LTV saves money.
3. Compare at least 10 lenders — use brokers for access to exclusive deals.
4. Plan for rate fluctuations — 5-year fixes offer safety.
5. Check all fees — a low rate with a huge arrangement fee can be more expensive.
6. Don't overstretch your affordability — leave room for rising living costs.

Frequently Asked Questions (2025)

Can I get a mortgage with bad credit?

Yes, but with fewer lenders and higher rates. A 6–12 month “credit rebuild” plan can greatly improve eligibility.

Are interest rates going down?

Analysts expect gradual reductions into 2026, but no return to ultra-low rates. Most lenders price cautiously.

Is 2025 a good year to buy?

If you have a stable income and deposit, yes — the market is more predictable and rates are falling compared to 2023–24.

Should I choose 2-year or 5-year fixes?

Two-year fixes offer flexibility, while five-year fixes offer security. It depends on how long you plan to stay in the property.