"With the rates charged on two-year and five-year fixed mortgages likely to become more closely aligned in 2025, borrowers will need help choosing between the longer-term security of a five-year product and the prospect of potentially switching to an even cheaper rate in 2027."
After several years of economic turbulence, 2025 may well be the year for everyone to take a breath - and stock. As we enter calmer interest rate territory, many may now turn their focus to planning, whether that’s lenders looking at longer-term innovation, brokers securing future paths for their businesses, or consumers wanting to better organise their financial lives.
Indeed, ‘taking stock’ of finances will be thrust upon 1.8mn mortgage borrowers over the next twelve months, as two-year & five-year fixed rate deals come to an end. That figure compares to 1.6mn who rolled off fixes in 2024 - and 1.4mn in 2023.
The Intermediary Mortgage Lenders Association (IMLA) predicts that remortgaging will gain momentum in both the residential and buy-to-let (BTL) markets in 2025; affordability plays a part. In 2023, we saw a large shift from remortgaging to Product Transfers (PTs) as higher and rising interest rates made affordability calculations more challenging. Since PTs don’t require an affordability check, it became the default choice for many borrowers needing a new mortgage arrangement after reaching the end of their fixed term.
As the Bank Base Rate (BBR) starts to fall (with four BBR cuts widely expected in 2025), affordability is gradually improving with more opportunities opening up for borrowers to either save or minimise an increase in their payments by switching lenders.
Over a quarter of borrowers with fixed deals coming up for renewal in 2025 have two-year fixed products taken out when rates were higher than now. The rest will be coming off five-year deals, many of which are likely to be priced lower than 2025 rates. Both will be keen to look for the best rates available to them.
This should, of course, be music to brokers’ ears. When a customer comes to you needing a remortgage, you have the chance to use your unique skills to their genuine advantage. This presents an opportunity too rarely offered in recent years to assess their wider financial situation and explain the choices available - some of which might be life-changing.
For example, those coming off higher rates may have the option of maintaining the same monthly payments while reducing their mortgage term, saving thousands in future interest payments. Or reducing their monthly payments but using some of the newly available funds to pay for more protection, start saving into an ISA, or pay more into a pension.
Those looking at higher payments may take it in their stride or look for a completely different type of deal such as a short-term fix or a capped variable, which their current lender may not offer.
With the rates charged on two-year and five-year fixed mortgages likely to become more closely aligned in 2025, borrowers will need help choosing between the longer-term security of a five-year product and the prospect of potentially switching to an even cheaper rate in 2027.
A resurgence in remortgaging is good news. It will boost competition between lenders looking to attract new customers, allow brokers to properly advise more customers, and give more borrowers access to the best solutions for their financial needs.
