It is tempting to assume that mortgage rates follow the Bank of England base rate closely. Right now, that assumption will cost you. The base rate has sat at 3.75% since December 2025, yet average two-year fixed deals are running at around 5.96 to 5.98%, and five-year fixes are little different at roughly 5.99 to 6.00%, according to data from Rightmove and Moneyfacts. A year ago, before the Middle East conflict sent energy prices sharply higher, those rates were sitting closer to 4.25%. The gap between then and now is not small.
Why Fixed Rates Are High When Base Rate Is Not
Lenders price fixed-rate mortgages using something called swap rates, which are tied closely to gilt yields (the interest the UK government pays to borrow money). When investors expect inflation to stay high, or when global energy shocks create uncertainty, gilt yields rise. Swap rates follow. Lenders then pass that cost on through higher fixed rates, regardless of what the Bank of England decides to do with base rate.
The geopolitical disruption since mid-2025 has done exactly that. Energy costs pushed inflation expectations upward, gilts sold off, and swap rates climbed. The base rate is one lever in a large machine. Right now, the other levers are pulling harder in the opposite direction.
Two-Year Fix, Five-Year Fix, or Tracker
This is the central decision for most buyers at the moment, and there is no universally right answer.
- Two-year fixes at around 5.96 to 5.98% give you a shorter commitment. If rates fall over the next two years as energy pressures ease, you will be free to remortgage sooner. The risk is that rates stay elevated, or rise further.
- Five-year fixes at roughly 5.99 to 6.00% offer more certainty. The rate is barely different from the two-year deal right now, which is unusual. Some buyers prefer the security of knowing exactly what they will pay until 2031.
- Tracker mortgages move with the base rate. The best trackers are currently priced at around base rate plus 0.60%, putting you at roughly 4.35%. That is meaningfully lower than any fix. The catch is that if the base rate rises, so does your payment. Trackers suit buyers who can absorb some payment volatility and who believe base rate will stay flat or fall.
Speak to a whole-of-market broker before deciding. They can model your specific loan size, term, and circumstances, and access deals not always visible on comparison sites.
A Worked Example
Take a repayment mortgage of 250,000 pounds over 25 years.
- At 4.25% (the rate available roughly a year ago), the monthly repayment would be approximately 1,355 pounds.
- At 5.97% (a current two-year fix), the same mortgage costs approximately 1,598 pounds a month.
That is a difference of around 243 pounds every month, or just under 2,920 pounds a year. For many households, that is a significant change to budget planning. Anyone who fixed two or three years ago at sub-2% rates and is coming off their deal now will feel that shift sharply.
The SVR Trap
If your fixed or tracker deal expires and you do not remortgage, your lender moves you automatically onto their Standard Variable Rate (SVR). The SVR is a rate the lender sets at its own discretion. The current average SVR is approximately 7.13%. On that 250,000-pound mortgage, your monthly payment would climb to around 1,773 pounds, more than 170 pounds a month higher than the current average fix.
Many borrowers drift onto the SVR without realising it, often because they assume they will deal with it later. Do not leave it. Most lenders let you lock in a new rate offer up to six months before your current deal ends. You are not committed until completion, so there is little downside to starting the conversation early.
How to Strengthen Your Position
Lenders price mortgages in bands based on loan-to-value (LTV), which is how much you are borrowing as a proportion of the property's value. A lower LTV generally means a better rate. If you are buying and can increase your deposit, even by a modest amount, it may move you into a cheaper band. Ask our team or your broker where the key LTV thresholds sit for deals you are considering.
Your credit record also matters. Make sure you are on the electoral roll, that there are no unexpected defaults or errors on your credit file, and that you are not making multiple credit applications in the months before you apply for a mortgage.
Practical Takeaway
Rates are higher than they were, and the reasons are structural, not just a matter of waiting for the Bank of England to act. If you are buying, remortgaging, or coming off a fix in the next six months, get advice from a whole-of-market broker now. Compare the tracker option honestly against the fixed-rate options. Lock in a rate offer as soon as you can. And if you are already on an SVR, treat moving off it as urgent. Our team can point you in the right direction, even if the final mortgage recommendation comes from a qualified adviser.
No comments
Leave a comment