Bank of England Holds Base Rate at 3.75% – But UK Mortgage Rates Are Moving
The Bank of England has held the base rate, but mortgage rates across the UK are shifting as lenders respond to global economic uncertainty and rising swap rates.
The Bank of England has today held the base rate – choosing not to continue with recent cuts, as some had previously expected.
The decision was made as uncertain global economic conditions – namely, the impact of the conflict in the Middle East and the resulting increase in the cost of oil – risk price rises here in the UK.
The Bank’s primary role is to keep price rises (inflation) low and stable. Inflation measures how much the prices of everyday items increase over time – usually measured by comparing the cost of items today, with how much they cost a year ago.
With inflation currently at 3% – above the Bank of England’s 2% target – these geo-political pressures make it less likely that interest rates will be reduced in the near future.
Bank of England base rate vs UK inflation since 2007
A view of how the Bank of England base rate and inflation have moved since 2007, alongside the 2% inflation target.
Source: Bank of England and ONS. Chart for illustrative purposes.
Mortgage Deals Disappearing Quickly
Mortgage rates are influenced by a number of factors – not just the base rate – and the mortgage market has already reacted to recent global events.
Lenders have been withdrawing mortgage deals at the fastest pace since Liz Truss’ 2022 mini-budget, highlighting just how quickly conditions can change.
Why Do Mortgage Rates Move When the Base Rate Doesn’t?
Many understandably assume that mortgage rates move directly in line with the Bank of England base rate.
In reality, mortgage pricing is highly influenced by swap rates – the rates lenders use when securing funding in financial markets.
Since the recent escalation in geo-political tensions, swap rates have risen by around 0.6%, increasing lenders’ costs and prompting many to adjust or withdraw mortgage products.
What This Means for Borrowers
The key takeaway is that mortgage rates can move quickly when market sentiment changes.
There are currently around 1.2 million borrowers with fixed deals ending within the next six months. Many will have been waiting in the hope that rates would fall further; however, with the outlook now less certain, securing a new rate sooner rather than later can offer protection against the possibility of further negative market movements.
The good news is that most new lenders allow you to lock in a new mortgage rate up to six months before your current deal ends. Importantly, if rates improve before completion, you can usually switch to the better deal. Providing certainty, without losing flexibility.
Why Acting Early Can Protect Your Mortgage Rate
We’re already seeing lenders reprice products quickly, with some deals simply being withdrawn rather than adjusted.
While the increases so far have generally been modest (around 0.1%–0.3%), the speed of change highlights why keeping an eye on your mortgage early can make a significant difference.
Securing a rate now can protect you from further potential increases, while still allowing room to benefit if the market improves.
Why Expert Mortgage Advice Makes the Difference
With lenders constantly adjusting pricing and product availability – not to mention policy and affordability assessments – navigating the mortgage market without advice can be challenging.
At Prism, we monitor the market daily to ensure our customers understand their options and secure the most cost-effective and suitable mortgage for their circumstances.
If your mortgage deal ends soon; you’re considering a remortgage; or you’re planning to move home, getting advice early can help you stay ahead of market changes.
Thinking About Your Next Mortgage Move?
If your current mortgage deal ends within the next 6-12 months, now’s the time to review your options.
Get in touch for independent, whole-of-market mortgage advice – delivered digitally, wherever you are in the UK.
Prism Mortgage & Protection Advice provides independent, whole-of-market mortgage advice to customers across the UK through secure digital appointments.
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