Fancy locking down a place in the UK? Maybe as a base, maybe as an investment. Either way, with the current state of mortgage interest rates in 2025, you’ve got to ask yourself whether it’s actually worth the loan.
Perhaps you should forget it and make a move to an expat community in Italy or Australia? Let’s see what’s happening, using the latest data and a few examples, throughout this article!
What Are the Current Mortgage Interest Rates in 2025?
The Bank of England trimmed the base rate to 4% in August 2025 after a string of small cuts earlier in the year, so that’s definitely eased pressure on new borrowers – potentially yourself.
Average mortgage rates on brand-new secured loans sat at 4.26% in August, down from 4.47% in May.
On the high street, best-buy tables change weekly. If we look at the tail-end of September, for example, mortgage brokers highlighted:
- Two-Year Fixed Rate Mortgage at 3.64% (60% loan-to-value LTV)
- Five-Year Tracker Mortgage around 4.6% with the same LTV cap.
Remember, those headline numbers don’t include things like valuation costs or even any cashback perks that could sweeten (or complicate) the deal, so keep those in mind, too!
Why Do Rates Differ So Much?
- Loan Amount and LTV: A 60% LTV deserves lower pricing than a 90% LTV because the risk of loss is smaller for mortgage lenders.
- Fixed Rate Period Length: A two-year fixed often prices lower than a five-year fixed because the lender carries less rate-risk.
- Credit Profile: The stronger your score, the more lenders will trust you with better mortgage deals.
Which Type of UK Mortgage Should You Choose?
Depending on your specific goals, you’ll get joy out of some mortgages more than others, so let’s break those down:
Is a Fixed Rate Mortgage Helpful If You Live Abroad?
Many UK expats choose a one-year fixed or five-year fixed product before they fly out. That’s because most people like knowing the exact monthly payments they have to make in sterling, which then makes budgeting in another currency easier.
The catch is the early repayment charges – typically 1-5% of the mortgage balance – if you clear the loan before the fixed rate period ends.
What About a Tracker Mortgage Tied to the Bank Rate?
A tracker mortgage follows the Bank of England base rate plus a set margin. With the base rate at 4% today, like we covered earlier, a tracker at “Base + 0.6” means it’ll be around 4.6%.
So, you’ll immediately see the benefit when rates fall, but you also pay interest at a higher level if inflation rears up. Fortunately, there’s usually no exit fee after the initial interest rate period, which makes it more attractive if you might sell up quickly.
Where Does a Variable Rate Mortgage Fit?
A variable rate mortgage – often the lender’s standard variable rate (SVR) – moves whenever the bank decides. SVRs currently hover above 6%, so you’d only sit on one temporarily, perhaps between fixed deals or while sorting paperwork.
How Do UK Rates Compare to European Hotspots?
- Portugal: Average fixed rate 3.307% (Banco de Portugal, August 2025)
- Spain: Average fixed rate 2.97% (Banco de España, August 2025)
The gap has narrowed, but UK rates are definitely still higher than the euro-zone average because sterling funding costs sit above Euribor right now. That said, transaction taxes abroad – think Portugal’s IMT or Spain’s ITP – are often a lot heavier than British stamp duty at modest price bands, so make sure you weigh the total cost instead of just the headline.
Does Taking a UK Loan Still Make Sense If You Plan to Let the Property?
A standard residential mortgage usually forbids long-term letting without consent. Once you leave for twelve months or more, most banks insist on a buy-to-let product or a “consent-to-let” fee.
It varies a bit depending on which lender you go to, but buy-to-let rates are usually roughly 0.75 percentage points above similar residential loans and require at least 25% equity.
Checklist before you rent out:
- Confirm with the lender whether your current mortgage allows letting.
- Factor agent fees and a 4-week void each year into cash flow.
- Keep a buffer equal to three months of mortgage payments for repairs.
What Hidden Costs Could Sink the Deal?
- Product Fees: £999 is standard on many headline mortgage deals – fee-free versions usually come at a higher rate.
- Legal and Valuation: Budget £1,500-£2,000.
- Buildings Insurance: This is usually compulsory for completion (premiums vary by postcode).
- Currency Spread: Transferring rent or proceeds to and from different countries can cost 0.5-1% via banks.
What Happens If Rates Fall Further?
You can remortgage when the fixed rate period ends or pay an early exit fee sooner. Lenders offer “switch and fix” products where they book today’s rate up to six months before completion.
We’d suggest that you keep an eye on the Bank of England’s meeting calendar – decisions here are updated roughly every six weeks.
How to Strengthen Your Mortgage Application From Overseas
Thinking about making the move overseas and securing a mortgage?
- Keep UK credit cards active and paid on time to maintain your score.
- Use a UK address for electoral roll registration if possible.
- Gather proof of foreign income: contract, payslips, tax returns – translated and notarised if required.
Many mainstream banks shy away from expat cases, but our team at Upscore can connect you with specialist local lenders that cater to expats – anywhere from France to the UAE – at no charge! We earn a fee from the lender if you take a loan out with them, so our platform doesn’t cost you a penny.
Is Overpaying a Good Idea?
If your deal allows 10% overpayment annually without penalties, knocking off even £200 a month shaves years off the term and slashes total interest. Just make sure you check that you won’t trigger early repayment charges.
Final Take: Worth It or Walk Away?
A UK house loan can very much still be financially sound if you:
- Lock a competitive fixed rate
- Plan for rental gaps
- Hold a contingency fund
Average mortgage rates are lower than they were last year, and if you aim for a safe loan-to-value (LTV) of 60%, a sub-4% headline is definitely still achievable!
How Upscore Can Help
Want a single dashboard that you can compile all your finances in? Upscore’s Finance Passport makes it easy to apply for mortgages wherever you’re based.
