Bank Rate is on hold, so why are fixed mortgage rates going up?

In September, the Bank of England kept its main interest rate at 3.75%.¹

So you might expect mortgage rates to stay the same too.

But many fixed-rate mortgages have actually become more expensive. A fixed-rate mortgage is one where your interest rate stays the same for a set time, usually two or five years.

The Bank of England says two-year fixed rates are now around 0.95 percentage points higher than before the conflict in the Middle East began earlier this year.¹ For example, a deal at 4% would now be around 4.95%.

Whether you are buying your first home or your current deal is ending, here is what is going on, in plain English.

What is Bank Rate?

Bank Rate is the interest rate the Bank of England uses for the banks and building societies that deal with it.² You might also hear it called the “base rate”. It is the same thing.

It affects the rates lenders offer to the rest of us on mortgages, loans and savings.²

The Bank looks at Bank Rate eight times a year. Its job is to keep inflation, which is how quickly prices are going up, at around 2%.²

Think of it like this:

• When prices are rising too fast, the Bank may put Bank Rate up. Borrowing costs more, people spend a bit less, and prices should slow down.
• When prices are rising slowly, the Bank may bring Bank Rate down to encourage spending.

Right now, prices are rising faster than the Bank would like. Inflation was 3.1% in August.¹ That is why three of the nine people who vote on Bank Rate wanted to raise it to 4%.¹

Why fixed rates do not just follow Bank Rate

When a lender offers you a fixed rate for two or five years, it is making a promise about the future. So it needs to think about what interest rates might do over the whole of that time, not just today.

To help with this, lenders look at what are called swap rates.³

Your mortgage broker might mention these to you when they are explaining about what is happening with the mortgage market.

Here is a simple way to picture it. Imagine agreeing today on a fixed price for something you will keep buying for the next five years. If everyone expects prices to rise, that fixed price will be higher. Swap rates work in a similar way for money.

When markets worry that interest rates could stay high or rise, swap rates go up. When swap rates go up, fixed mortgage rates could go up too, even if Bank Rate has not moved at all.³

That is exactly what has happened this year.

Does this mean Bank Rate will go up?

Not necessarily.

Swap rates include people’s guesses about the future, plus a little extra to cover uncertainty. The Bank of England has said that some of the recent rise is down to that extra uncertainty, not a firm belief that Bank Rate will go up.⁴

So nobody knows for sure. And uncertainty on its own could make fixed rates more expensive.

What if I am buying a home?

If you are buying your first home, or moving, the same idea applies. The “Bank Rate” does not tell you what rate you will be offered.

The rate the lender will offer you could depend on your deposit, your income and spending, your credit history, the property and the lender’s own rules.

The lowest rate is not always the cheapest deal either. Fees, how long the deal lasts and any early repayment charges, known as an ERC (a fee for leaving your deal early or paying off more than you are allowed) could all change the overall cost.

I already have a fixed rate. Does this affect me?

Not straight away. Your rate stays fixed until your deal ends, subject to the terms of your mortgage.

The Bank of England estimated that nearly 750,000 households on rates below 3% would see their fixed deals end during 2026, with average monthly payments going up by around £170.⁵ Your own figure could be higher or lower.

If you do nothing when your deal ends, you will usually move onto your lender’s standard variable rate (SVR). SVRs are usually higher than other rates you might be able to get.⁶

Your options could include:

• a new deal with your current lender, known as a product transfer
• moving to a different lender, known as remortgaging.⁶

Each option could have different fees, so it is worth looking at the full cost, not just the rate. Many lenders let you secure a new deal several months before your current one ends, so it makes sense to start early.

What if I am on a tracker or variable rate?

A tracker mortgage follows Bank Rate. If Bank Rate goes up by 0.25 percentage points, your rate normally goes up by the same amount. If it goes down, so does your rate.⁷

An SVR is set by your lender and could change at any time.⁷

If you are on a tracker or variable rate, Bank Rate decisions could affect your monthly payments much more directly. The next decision is due on 5 November 2026.²

Should I wait for rates to fall?

It is hard to get the timing right.

Even if Bank Rate is cut, fixed rates may not fall by the same amount, because the markets may have already expected it. And fixed rates could rise even when Bank Rate stays the same.

So instead of asking “What will Bank Rate do next?”, a better question is: “What are my options right now, and what would each one cost me?”

Talk to us

If your fixed deal is ending soon, or you are thinking about buying or moving home, we could look at your circumstances and explain the options that may be available to you from our comprehensive panel of lenders.  Remember we don’t charge you a broker fee and so it’s always worth having a conversation to see what might be the most suitable options for you.

Get in touch with the team to book an appointment.