Effective rate on newly drawn mortgages fell to 4.19%, the lowest since January 2023

The effective interest rate on newly drawn mortgages fell by 7 basis points to 4.19% in September, the lowest since January 2023, when it stood at 3.88%, the Bank of England said in its Money and Credit release published on 29 October 2025¹. The Bank said the fall continued the downward trend observed since March 2025¹. The effective rate is the actual interest paid on new mortgage lending¹.

Net borrowing of mortgage debt by individuals rose by £1.2 billion to £5.5 billion in September, the highest since March 2025, when it was £13.2 billion¹. Gross lending was £24.9 billion, up from £23.0 billion in August, while gross repayments rose slightly to £20.3 billion from £20.0 billion¹. The annual growth rate for net mortgage lending increased to 3.2% from 3.0% in August, the highest since January 2023¹.

Net mortgage approvals for house purchase, an indicator of future borrowing, increased by 1,000 to 65,900 in September. Approvals for remortgaging, which capture only remortgaging with a different lender, decreased by 600 to 37,200¹.

The rate on the outstanding stock of mortgages was unchanged at 3.89% in September¹. The Bank's release gives no figure for the average monthly mortgage payment. A Scottish Government economic bulletin published on 12 November 2024, covering an earlier period, reported that the average monthly direct debit payment for mortgages was £955 in September 2024, up 8.5% over the year, and that the mortgage direct debit failure rate fell to 0.90% from 0.96% a year earlier². Those figures relate to September 2024 and not to the September 2025 data in the Bank's release.

"The 'effective' interest rate – the actual interest paid – on newly drawn mortgages decreased by 7 basis points to 4.19% in September, the lowest since January 2023 (3.88%), continuing the downward trend observed since March 2025."

Bank of England, Money and Credit, September 2025¹

Other household borrowing rates moved differently in September. The effective rate on interest-charging overdrafts rose by 33 basis points to 21.86%. The effective rate on new personal loans increased slightly to 8.34% from 8.32%, and the effective rate on interest-charging credit cards rose slightly to 21.44% from 21.42%¹.

Effective interest rate, September 2025	Rate	Change
Newly drawn mortgages	4.19%	down 7 basis points
Outstanding stock of mortgages	3.89%	unchanged
Interest-charging overdrafts	21.86%	up 33 basis points
New personal loans	8.34%	up from 8.32%
Interest-charging credit cards	21.44%	up from 21.42%

Source: Bank of England, Money and Credit, September 2025¹

Net borrowing of consumer credit by individuals was £1.5 billion in September, down from £1.7 billion in August. Net borrowing through credit cards was little changed at £0.7 billion, while net borrowing through other forms of consumer credit, such as car dealership finance and personal loans, decreased to £0.8 billion from £1.0 billion¹. The annual growth rate for all consumer credit rose slightly to 7.3% from 7.2%. The annual growth rate for credit card borrowing increased to 10.8% from 10.5%, while the annual growth rate for other forms of consumer credit decreased slightly to 5.7% from 5.8%¹.

Households' deposits with banks and building societies increased by £7.9 billion in September. Households deposited an additional £5.8 billion into interest-bearing sight deposit accounts, £2.4 billion into ISAs and £0.7 billion into non-interest-bearing accounts, partly offset by withdrawals of £1.5 billion from interest-bearing time deposit accounts¹. The effective interest rate paid on individuals' new time deposits was 3.82%, up from 3.79% in August, while the rate on the outstanding stock of time deposits fell by 7 basis points to 3.42%¹.

Why it matters for households

The 4.19% effective rate applies to mortgages newly drawn in September, so it reflects what borrowers completing a deal in that month actually paid rather than the rates on existing loans¹. The rate on the outstanding stock of mortgages, which covers the larger group of households already repaying, was unchanged at 3.89%¹. Because a high share of mortgages are on fixed rates, changes in new lending rates reach existing borrowers only gradually, as the Scottish Government bulletin noted in relation to earlier data².

For savers, the rate paid on new time deposits rose slightly to 3.82%, while the rate on the outstanding stock of time deposits fell to 3.42%¹. Households moved £5.8 billion into interest-bearing sight deposit accounts and £2.4 billion into ISAs during the month¹.

For borrowers on consumer credit, the effective rates reported for September were 21.86% on interest-charging overdrafts, 8.34% on new personal loans and 21.44% on interest-charging credit cards¹. Annual growth in credit card borrowing rose to 10.8%¹.