Mortgage Market Update

Bank of England Base Rate Cut to 4.00% – What It Means for Mortgage Borrowers

The Bank of England has reduced the base rate from 4.25% to 4.00%—its second cut of 2025. This move signals a gradual shift in monetary policy as inflation continues to ease and the economy shows signs of strain.

This decision reflects:

Continued softening of inflation (latest CPI at 2.4%)
Slowing but elevated wage growth (5.6%)
Rising unemployment (now at 4.6%)
Ongoing global and domestic economic pressures

Markets still anticipate a further cut in November, but the Bank is proceeding cautiously.

Why Mortgage Rates Aren’t Falling by 0.25%

While a base rate cut often makes headlines, it doesn’t translate directly into lower fixed-rate mortgage deals. Lenders use a more complex set of tools to price their products, and base rate changes are only part of the story.

How Lenders Price Mortgage Rates

When setting fixed-rate mortgages, lenders primarily look at:

1. SONIA (Sterling Overnight Index Average):
SONIA closely tracks the Bank of England base rate and reflects the cost of short-term borrowing. It influences how lenders fund certain mortgage products.

2. Interest Rate Swaps:
Swap rates are the key driver of fixed mortgage pricing. These are financial instruments lenders use to hedge risk when offering fixed-rate deals. They reflect market expectations for future interest rates over a set period (e.g. two or five years).

An Example:

A lender offering a 2-year fixed mortgage wants to protect its margin if interest rates rise. It can enter into a swap that locks in its cost of funds based on current 2-year swap rates. If the 2-year swap rate is 4% and the lender offers a mortgage at 5%, they lock in a 1% margin.

As swap rates fluctuate daily in response to inflation data, central bank commentary, and global events, so too do the mortgage rates offered by lenders.

Swap Rate Movement – Limited Response

Although the Bank of England cut the base rate today:

2-year swap rates fell by approximately 0.08%
5-year swap rates remained flat

This muted reaction is due to the market having already priced in this move. Ongoing concerns about inflation and wage growth are also limiting expectations of further aggressive cuts.

Lender Reaction – Who’s Moved?

Several major lenders have made small changes:

Barclays and HSBC have trimmed selected fixed rates by 0.10–0.15%
Halifax and Nationwide have released targeted reductions this week
Santander and NatWest have been more reserved, with fewer pricing changes so far

As we move further into August, more lenders may adjust pricing—especially if competition increases or swap rates ease further.

Will Rates Keep Falling?

Even with a base rate of 4.00%, we’re unlikely to see a rapid or dramatic drop in mortgage rates.

Several reasons for caution remain:

Swap rates remain above their pre-October 2024 levels
Services and wage inflation are still higher than the Bank would like
Global events—such as US tariffs and a slowing Chinese economy—could weigh on market confidence

This means we may see modest, selective reductions, but not a return to the ultra-low rates seen in past years.

What Borrowers Should Consider

If your current deal ends in 2025 or you're planning to buy:

Secure a rate now:
Lenders are repricing cautiously, and rates can change with little notice.

Stay on top of the market:
Rates shift daily. Some lenders move weekly, others react to market signals more slowly. Working with a broker ensures you don’t miss opportunities.

Ask about rate switches before completion:
Many lenders allow you to switch to a lower rate if one becomes available before your mortgage completes.

How Sarah Grace Mortgages Can Help

We’re currently helping clients to:

Lock in competitive rates early
Monitor the market for rate improvements
Take advantage of early switch opportunities
Understand the differences between lender strategies

With ongoing market uncertainty, timing and attention to detail are key. We stay on top of the live market so you don’t have to.

Final Word

The base rate cut to 4.00% marks a further step in the Bank of England’s pivot toward easing, but fixed-rate mortgages remain tethered to swap market behaviour. While pricing is improving slowly, it’s not guaranteed—and volatility continues.

Borrowers who act early, understand how rates are priced, and work with an expert broker will be best positioned to secure value in this changing landscape.

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Should You Start Looking at Your Mortgage 6 Months Before Your Rate Ends?

By Jordan Nasser • February 24, 2026

Should You Start Looking at Your Mortgage 6 Months Before Your Rate Ends? If your fixed rate ends this year, you might be wondering whether six months is too early to review your options. In today’s market, starting early is often a smart move and here is why. Why Look 6 Months Ahead? • You can secure a new rate early • Most lenders’ offers (when switching lenders) can be secured up to 6 months in advance • This means you can lock in a rate now and protect yourself if rates rise Importantly, securing a rate doesn’t mean you’re locked in with no flexibility. Our approach is simple: • We secure a competitive rate with a new lender now. • Then, when your current lender releases their switch rates (usually 3-4 months before your deal ends), we review those too. • If your existing lender offers a better deal, we can cancel the new application and switch you across instead. So that you are protected if rates rise but you are then still free to move if something better becomes available with your existing lender. Why Timing Matters The mortgage market is volatile. Rates can: • Move up or down quickly - fixed rates are not directly linked to bank base rate and we are currently seeing some lenders INCREASE their fixed rates • Change with little notice • Be withdrawn suddenly Trying to “time” the perfect moment is almost impossible. Starting early simply gives you more control and more choice. What If You Leave It Too Late? If no new deal is arranged when your fixed rate ends, you will move onto your lender’s Standard Variable Rate - which is typically around 6-7%. The Bottom Line Looking at your mortgage around six months before your rate ends can: • Protect you from potential rate increases • Give you clarity and peace of mind • Reduce last-minute stress • Keep your options open It’s not about committing too early. It’s about being prepared and making sure you’re in the strongest position possible. If your rate ends this year, now is the time to start the conversation. Book a call with one of our advisers today.

Mortgage Market Update- February 2026

By Jordan Nasser • February 13, 2026

Why Are Lenders Increasing Fixed Mortgage Rates — Even After a Base Rate Cut? You might expect that when the Bank of England cuts the base rate, mortgage costs fall across the board. But right now many borrowers are seeing fixed mortgage rates rise, or fail to drop as quickly as hoped. Here’s why. Fixed Mortgage Pricing Is Driven by Swap Rates, Not Just Base Rate When lenders price fixed-rate deals, they don’t simply base them on the Bank of England’s base rate. A critical input is the cost at which banks can secure funding in the financial markets — in particular swap rates, which reflect expectations of future interest rates over the term of the mortgage. Even after the base rate cut- Swap rates have remained elevated or even increased in recent months, as markets reassess inflation, rate expectations and economic uncertainty. Lenders pass these higher funding costs on to customers through higher fixed rates. In other words, mortgage pricing reflects what lenders expect rates to be over the fixed term, rather than the current base rate alone. Market Expectations for Future Base Rates Are Uncertain Although the Bank of England has started cutting the base rate, markets still price in uncertainty over how far and how fast rates will fall. Analysts and investors may believe that fewer or slower cuts will come than previously expected. That pushes up swap and gilt yields - and lenders respond by holding fixed mortgage rates higher to protect margins. This dynamic explains why, in some recent weeks, average fixed mortgage pricing has crept up even though the base rate is lower. Lenders Are Managing Risk Post-Rate Peak After a prolonged period of high interest rates- Many lenders are recalibrating how they price risk, particularly for longer fixed terms. Higher costs of funding, profit margin considerations and capital constraints all feed into pricing decisions. This risk-aware approach means lenders may tread carefully, keeping fixed rates higher rather than cutting aggressively, even if base rates are moving down. Competition Isn’t Uniform Across the Market Not every lender reacts the same way- Some banks might aggressively price products to gain market share. Others may hold back, widen pricing and wait for clearer signals on inflation or economic data. The result is a mixed marketplace - where some fixed rates fall, others rise, and overall averages can trend up even in a cutting cycle. Higher House Prices and Affordability Pressures Still at Play While the base rate affects borrowing costs, other factors also influence mortgage pricing: UK home prices have recently passed key milestones, indicating sustained demand and potentially greater risk for lenders. Lenders remain focused on affordability calculations, loan-to-value ratios and credit risk - all of which feed into how fixed deals are priced. These ongoing pressures can counteract the expected downward movement in mortgage pricing. So What Should Borrowers Take Away? Don’t assume base rate cuts mean automatic lower fixed rates. Pricing is shaped by market funding costs, risk expectations and lender strategy. Watch swap rates and market expectations, as these more closely drive fixed mortgage pricing than the base rate itself. Act sooner rather than later if you see a good fixed deal - waiting for even lower rates could backfire if market pricing shifts. Talk to a broker to understand how these dynamics affect your specific circumstances - a small difference in rate can have a big impact on monthly payments and total interest over the mortgage term.

Mortgage Market Update- January 2026

By Jordan Nasser • February 1, 2026

Where We Stand: Base Rate and Market Mood The Bank of England cut the Bank Rate to 3.75% in December, marking the first reduction after a prolonged period of higher rates. The move reflected easing inflation and a slowing economy, and confirmed that interest rates have likely passed their peak. However, while the direction of travel is now downwards, progress is expected to be gradual. Markets are increasingly focused on how persistent inflation will be and how quickly further cuts might follow, rather than assuming a smooth run of reductions. Fixed Deals: Driven by Swap Rates as Much as Base Rate Fixed mortgage rates are heavily influenced by swap rates, which is particularly relevant at the moment. SONIA swap rates fell through much of 2025, helping fixed mortgage rates improve ahead of the December base-rate cut. Since late December, some swap rates have edged slightly higher, although movements have been modest and vary by term. This reflects short-term market reassessment rather than a clear change in the longer-term outlook. This helps explain why fixed mortgage rates have not continued to fall consistently month-on-month. While rates remain lower than their highs earlier in 2025, recent movements in swap rates suggest that further improvements may be slower and less predictable in the near term. That said, competition between lenders remains healthy, and attractive deals are still available! If your current deal ends in the next 6 months it is still sensible to review options early. Securing a rate now can provide certainty, while keeping the flexibility to switch if pricing improves again. Looking Ahead: What Could Early 2026 Bring? The next Bank of England decision is due in early February. Further base-rate cuts are possible later in the year, but they are likely to be cautious and data-driven. For fixed-rate borrowers, swap rates will remain the key indicator to watch. If markets regain confidence that inflation will continue to ease, swap rates could fall again - supporting lower fixed mortgage pricing. If not, pricing may stabilise for a period rather than continue to drift down. What This Means for Borrowers and Home Buyers Fixed rate ending soon - Start comparing options now. Acting early gives you certainty and avoids last-minute pressure. First-time buyer or mover - Rates are lower than they were last year, but changes may be gradual. Focus on what fits comfortably within your budget. Tracker or variable rate borrower - The December base-rate cut may already have reduced your payments. Future cuts remain possible but are not guaranteed in the short term. Buy-to-let borrower - Lender appetite has improved, but pricing is sensitive to swap-rate movements. Reviewing options early remains important. What We Are Watching This Month The Bank of England’s February rate decision. SONIA swap rate movements and what they signal about market expectations. Whether lenders absorb recent swap increases or pass them into pricing. Early-year housing market demand and buyer confidence. Final Thoughts January feels like a month of measured realism. The base-rate cut was an important milestone, but recent movements in swap rates show that the path down will not be perfectly smooth. For borrowers, this reinforces the value of planning ahead rather than trying to time the market. If you are thinking about buying, moving or remortgaging in 2026, now is a sensible time to review your position and consider your options. We can help you assess different scenarios and decide the best approach for you.