Mortgage rates hit three-year high, BBR rise imminent

Lenders have been repricing ahead of the Bank Base Rate (BBR) vote, causing fixed mortgage rates to hit a three-year high, according to Moneyfactscompare.co.uk analysis.

• A challenging environment to reprice fixed rate mortgage deals created a mix of activity from lenders over recent weeks, a BBR hike of 0.25% is expected tomorrow.
• Major lenders could pivot over the coming days if future pricing expectations stabilise. However, the lowest two-year fixed rates from Barclays, HSBC, Lloyds Bank, NatWest and Santander remain 0.44% higher on average versus the start of September.
• The Moneyfacts Average New Mortgage Rate has hit a three-year high, rising to 5.89%, up from 5.83% at the start of October, last higher in November 2023 at 6.07%.
• Over £2,000 added to mortgage repayments per year after 1% mortgage rate hike. The average two-year fixed mortgage rate has risen by 1.14% since January 2026, up from 4.83% to 5.97%, now its highest point since December 2023 (6.04%). This means the same mortgage of £250,000 over 25 years taken now, versus the start of 2026, would cost £169 more in monthly mortgage repayments, or £2,028 more per year.
• Borrowers face an additional rise of around £440 to mortgage payments over 12 months. A 0.25% rise adds around £37 to monthly mortgage repayments, or £444 per year (based on a rate of 5.00%, rising to 5.25% - borrowing £250,000 over 25 years).

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Mortgage rates have risen to a three-year high as a result of lenders grappling to re-adjust rates amid swap rate volatility. Major lenders expect an imminent rise to the Bank of England Base Rate (BBR), their lowest rates are now priced 0.44% higher than they were at the start of September. Lenders could well pivot away from making aggressive rises over the coming weeks, but most of the damage is unlikely to unwind entirely. Lenders look at their margins very carefully, so it would be unwise to price deals too low when uncertainty remains. If the Monetary Policy Committee (MPC) indicate a calmer path on future rate expectations, fixed mortgage rates could reduce slightly before the year is over, as some may have overcompensated for swap rate rises. A BBR rise would be the first hike in three years, yet with conflicts in the Middle East and between Russia and Ukraine remaining on a knife-edge, prolonged pressure on global inflation could worsen the outlook for UK interest rates.

“Delaying plans to get a mortgage this year has already come to haunt borrowers; with the rate on a typical two-year fixed mortgage rising by more than 1%, it would cost over £2,000 a year more in repayments when securing a deal now, than at the start of 2026. Economists are expecting BBR to rise by 0.50% by February, so borrowers due to refinance in 2027 would be wise to seek advice ahead of when their deal expires to compare their options. Securing a fixed deal by a making a product transfer between three or six months in advance could be a wise choice. However, borrowers could instead consider a two-year base rate tracker mortgage, many of which are priced almost 1% lower than their fixed rate counterparts. Timing is everything though, because a Base Rate rise gives a green light to lenders to pass it on, and trackers are hit first and foremost. However, even if Base Rate jumped by 0.50% by spring, tracker customers could still be better off than if they grabbed a fixed rate, so the right choice ultimately depends on borrowers being confident they can stomach future rises. The devil is in the detail. Regardless, those coming off a low fixed rate must avoid falling onto a revert rate, which sits around 7% on average. Those who secure a two-year fixed rate deal compared to falling onto a revert rate could save £182* each month in repayments.” 

*Average standard variable rate (SVR) is currently 7.13%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,788 per month, versus £1,606 per month on 5.97% two-year fixed rate.