‘The damage is unlikely to unwind entirely’
Rachel Springall, finance expert at Moneyfacts, said lenders had been caught between the need to reprice and the risk of overshooting.
“Mortgage rates have risen to a three-year high as a result of lenders grappling to re-adjust rates amid swap rate volatility,” she said. “Major lenders expect an imminent rise to the Bank of England Base Rate, their lowest rates are now priced 0.44% higher than they were at the start of September. Lenders could well pivot away from making aggressive rises over the coming weeks, but most of the damage is unlikely to unwind entirely.”
Springall acknowledged that the MPC’s forward guidance could provide some relief but cautioned against expecting a sharp reversal. “If the Monetary Policy Committee indicate a calmer path on future rate expectations, fixed mortgage rates could reduce slightly before the year is over, as some may have overcompensated for swap rate rises,” she added. “A BBR rise would be the first hike in three years, yet with conflicts in the Middle East and between Russia and Ukraine remaining on a knife-edge, prolonged pressure on global inflation could worsen the outlook for UK interest rates.”
On the broader impact for households, Springall was direct. “Delaying plans to get a mortgage this year has already come to haunt borrowers; with the rate on a typical two-year fixed mortgage rising by more than 1%, it would cost over £2,000 a year more in repayments when securing a deal now, than at the start of 2026.”
Tracker or fixed: the advice question brokers face
For brokers advising clients in the current environment, the choice between tracker and fixed products is both live and consequential. Two-year base rate tracker mortgages are currently priced almost 1% lower than their fixed rate counterparts. The two-year tracker average stands at 4.68% against the two-year fixed average of 5.97%, presenting a potentially significant saving for those who can tolerate rate exposure.
