How Inflation Is Affecting Mortgages in 2025

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Inflation is back in the headlines—and it’s making waves across the UK mortgage market. As the cost of living rises, so too do interest rates, creating challenges for both new buyers and existing homeowners. Whether you’re planning to purchase a property or considering your remortgage options, understanding the impact of inflation is crucial.

At True Advice Financial Services, we are committed to helping our clients make informed financial decisions—particularly in times of change. With inflation remaining elevated in 2025, many homeowners and prospective buyers are seeing its direct effects on mortgage costs, lending conditions, and long-term planning.

In this article, we outline how inflation and interest rate changes are shaping the mortgage landscape in the UK.

The Link Between Inflation and Mortgage Rates

As inflation rises, the Bank of England typically responds by increasing the base interest rate. This is intended to reduce demand and bring inflation back under control. However, higher base rates also mean higher borrowing costs.

For mortgage holders and applicants, this results in:

  • Higher interest rates on new mortgage deals.

  • Increases in monthly payments for those on tracker or variable rates.

  • More expensive options for those needing to remortgage.

How Different Mortgage Types Are Affected

Tracker Mortgages

These mortgages are directly linked to the Bank of England base rate. Payments increase in line with any rate rises.

Standard Variable Rate Mortgages (SVRs)

Lenders typically adjust SVRs in response to changes in the base rate, though not always immediately or by the same amount. Borrowers on SVRs may see their costs rise unpredictably.

Fixed-Rate Mortgages

Existing fixed-rate deals offer protection from immediate increases. However, new fixed deals now carry higher rates than in recent years, and many borrowers coming to the end of their term may face a significant increase in monthly repayments.

Affordability and Lending Criteria

Lenders are responding to inflation and rising rates by applying stricter affordability checks. These include:

  • Stress-testing repayments at higher interest rates.

  • Requiring larger deposits in some cases.

  • Reducing the maximum loan amounts offered to borrowers.

This makes it more difficult for some individuals to secure the borrowing they may have qualified for previously.

Remortgaging Considerations

A large number of borrowers are now approaching the end of fixed-rate deals arranged during the low-interest period of recent years. In many cases, the cost of replacing those deals is significantly higher.

If your current mortgage deal ends in the next 6–12 months, it may be worth reviewing your options now. Early advice can help you:

  • Avoid moving to a more expensive standard variable rate.

  • Secure a competitive fixed or flexible deal in advance.

  • Plan for the financial implications of a higher repayment rate.

How True Advice Financial Services Can Help

We provide independent, whole-of-market mortgage advice, helping our clients make decisions with confidence in a complex market. Our advice is tailored to your personal circumstances and aligned with your financial goals.

Whether you are:

  • Applying for your first mortgage,

  • Moving home,

  • Looking to remortgage, or

  • Reassessing your buy-to-let portfolio,

We can help you understand your options and secure the most appropriate solution available.

Speak to an Adviser

For clear, independent mortgage advice in 2025, please get in touch with the team at True Advice Financial Services.

Regulatory Statements

Equity Release

Equity Release plans are not right for everyone. And it is important that you fully consider your options and receive independent financial advice before making a decision. It is also important that, if you do decide to use an equity release product, you choose one that meets your needs.

Remember that taking an equity release plan is generally a long term option. However, there are flexible plans available that may fit your varying needs and some will allow you to repay in the future without penalties.

Buy to Let Mortgages

Some Buy to Let Mortgages are not regulated by the FCA.

Mortgages

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Investments

All investments involve a degree of risk of some kind. This section describes some of the risks which could be relevant to the services we provide you. We may provide further risk information during the course of our services to you, as appropriate.

Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets outside our control. Investments and the income from them may go down as well as up and you may get back less than the amount you invested. Past performance is not a guide to future performance.

True Advice Financial Services is a trading style of TA and SE Hollom Ltd. Which is an Appointed Representative of New Leaf Distribution Ltd. Which is authorised and regulated by the Financial Conduct Authority : Number 460421.

Registered Office : New Leaf Distribution Limited, 165 – 167 High Street, Rayleigh, Essex, SS6 7QA

Ashley Hollom
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