The Bank of England voted today to maintain the Base Rate at 3.75%, despite strong indications only a few weeks ago that a rate cut was likely this month. This shift in outlook appears to be driven by the ongoing conflict in the Middle East and its impact on global oil prices.
Why are mortgage rates increasing?
In recent weeks, the majority of lenders have increased their mortgage rates, largely due to significant movements in the financial markets. Fixed-rate mortgage products are typically priced using SONIA swap rates, which reflect market expectations of where the Base Rate will be over a given period.
Previously, markets had anticipated further rate reductions in 2026, which contributed to a decline in mortgage rates over the past couple of months.
However, since the escalation of conflict in the Middle East and the resulting rise in oil prices, there are growing concerns that inflation may increase, alongside the cost of everyday goods. The Bank of England has a target of maintaining inflation at 2%. Should inflation begin to rise again, it would limit the Bank’s ability to reduce the Base Rate and may even require consideration of future increases.
As a result, financial markets have adjusted their expectations, leading to a rise in swap rates. This, in turn, has prompted mortgage lenders to increase the rates they offer.
What are my options if I am looking for a mortgage or my current deal is ending?
If you are looking to step onto the property ladder or move to your next home, your options for securing a mortgage product in advance are limited until you are in a position to proceed. Most lenders will only allow you to secure a mortgage rate once you have had an offer accepted on a property and have submitted a full mortgage application.
However, you can prepare in advance by ensuring that all necessary documentation is in place. This will enable you to proceed quickly and secure a suitable product as soon as you are ready to apply.
If your current mortgage deal is approaching its end date, you may be able to secure a new deal with an alternative lender up to six months in advance. In contrast, product transfers with your existing lender are typically only available closer to the end of your current deal. While this timeframe varies by lender, it is generally around three months before expiry.