The Bank of England (BoE) trimmed the base rate by 0.25 percentage points to 4.00% in early August. Tracker and Standard Variable Rate (SVR) borrowers will have seen that feed through. For fixed rates, however, pricing has firmed.

What’s driving the move?

Fixed-rate mortgages are funded off Sterling Overnight Index Average (SONIA) swap rates, which reflect expectations for future interest rates and government borrowing costs. In early September, gilt yields rose and swaps followed, lifting lenders’ funding costs. This prompted several high-street lenders to add 0.10–0.20 percentage points to selected fixes, despite a lower base rate.

What borrowers should do now?

  • If your deal ends within 6–9 months, secure one now. Most lenders allow you to lock in a rate and switch later if a better option appears.
  • Keep flexibility in mind. A three-year fix or a tracker with no early repayment charges can be a sensible bridge if you value options.
  • Focus on total cost, not just the headline rate. Fees, incentives and portability matter, particularly if you may move or refinance again.
  • Don’t anchor to the base rate. Fixed deals follow swaps and gilts, which can move differently from the base rate in the short term.

Wondering whether to choose a fixed or variable rate mortgage? This article breaks down the key differences to help you decide.

BoE “hold for longer”

Since the base rate fell to 4.00%, Monetary Policy Committee (MPC) member Catherine Mann has argued for a “persistent” hold given inflation persistence and still‑elevated wage growth, while stressing she could support faster cuts if growth weakens.

Headline Consumer Price Index (CPI) re‑accelerated to 3.8% in July, making it harder to predict future reductions in the short term for the Bank of England base rate. Markets are reflecting that risk: long‑term gilt yields have pushed back toward multi‑decade highs, tightening financial conditions even as the base rate fell. A recent Reuters poll pencilled in one more BoE cut in 2025, with most easing deferred into 2026.

Bottom line: The BoE’s near‑term message is patience. Borrowing costs will move with swaps and gilts as much as with the base rate. Plan for steady rather than swooning rates over the short to medium term.

 

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If you would like to discuss your mortgage options with a qualified professional, you can speak to one of our mortgage advisors on 0800 980 8777, by emailing us at info@privatefinance.co.uk

Disclaimer: This note is for information only and does not constitute tax advice. Always seek professional advice specific to your circumstances. The views and opinions expressed in this content are those of the author and do not constitute financial, legal, or professional advice, nor should they be interpreted as a recommendation. They do not necessarily reflect the official views, policies, or positions of Private Finance, and are not intended to represent broader market or industry perspectives.

 

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