08/10/2026
𝗦𝘄𝗮𝗽 𝗥𝗮𝘁𝗲𝘀 𝗘𝘅𝗽𝗹𝗮𝗶𝗻𝗲𝗱
Ever heard me say mortgage rates are going up or down, and wondered why there's been no news about the Bank of England changing the base rate?
Here's why. Tracker mortgages follow the Bank of England base rate directly. But the vast majority of UK borrowers are on fixed rates, and those are priced mainly on something called swap rates.
𝗪𝗵𝗮𝘁 𝗶𝘀 𝗮 𝘀𝘄𝗮𝗽 𝗿𝗮𝘁𝗲?
Put simply, it's the market's best estimate of what it will cost a lender to fund your mortgage over a 2 or 5-year fixed period.
Lenders mostly fund mortgages from savers' deposits and other sources tied to short-term interest rates. When they offer you a fixed rate, they take on a risk: their costs could go up while your payments stay the same.
Swap rates are how they price that risk. So when swap rates rise, fixed mortgage rates usually follow, and when they fall, mortgage rates tend to come down too.
𝗪𝗵𝗮𝘁 𝗽𝘂𝘀𝗵𝗲𝘀 𝘀𝘄𝗮𝗽 𝗿𝗮𝘁𝗲𝘀 𝘂𝗽?
Anything that makes the markets expect higher inflation or higher interest rates ahead. In recent years that has included:
The aftermath of the COVID pandemic
The Russia–Ukraine war
UK political uncertainty, such as the Liz Truss mini-budget and changes of government and Prime Minister
Most recently, the Iran–US war and the closure of the Strait of Hormuz, which sent oil prices sharply higher. Dearer oil means dearer energy, and that pushes up the price of almost everything else as businesses pass on their costs.
𝗪𝗵𝘆 𝗰𝗮𝗻 𝘀𝘄𝗮𝗽 𝗿𝗮𝘁𝗲𝘀 𝗿𝗶𝘀𝗲 𝘄𝗵𝗲𝗻 𝘁𝗵𝗲 𝗯𝗮𝘀𝗲 𝗿𝗮𝘁𝗲 𝗵𝗮𝘀𝗻'𝘁 𝗺𝗼𝘃𝗲𝗱?
The base rate is today's rate. Swap rates look ahead, reflecting where the markets expect rates to average over the next 2 or 5 years.
The Bank's Monetary Policy Committee (MPC) sets the base rate mainly to control inflation, but it also has to weigh up the effect on economic growth and jobs. So it may hold the rate even when inflation is pointing towards a rise, while the markets have already priced that rise in.
We saw this in September. The MPC held the base rate at 3.75%, but 3 of its 9 members voted to raise it. Not enough to change the rate this time, but a clear sign of which way some of the committee are leaning.
𝗪𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝗺𝗲𝗮𝗻 𝗳𝗼𝗿 𝘆𝗼𝘂?
Fixed mortgage rates can change without any announcement from the Bank of England, and sometimes with very little notice. If your current deal ends in the next 6 months, or you're planning to buy, it's worth a conversation sooner rather than later. Drop me a message and I'll talk you through your options.
Andy Westerdale Mortgage and Protection is a trading style of Mortgage Connect (NI) Ltd who are authorised and regulated by the Financial Conduct Authority FCA No 915845.
Your home may be repossessed if you do not keep up with repayments on your mortgage.
Sources:
Bank Rate held at 3.75%, but three voted to raise it
Bank of England Monetary Policy Decision: September 2026
