Nearly two million fixed deals expire before the year ends
Days before the Bank of England's next rate decision, its own chief economist has called for an immediate increase, a call that lands in the middle of a lender repricing round already under way.
Huw Pill told the Edinburgh Chamber of Commerce on September 7 that waiting for events in the Middle East to settle before acting risked letting inflation pressures become entrenched.
Pill argued that a 25-basis point rise, to 4%, would send what he called a "clear and unambiguous signal" of the Monetary Policy Committee's resolve on inflation.
He was one of only three members to vote for a rise in July, while the majority, including governor Andrew Bailey, held the rate at 3.75%. Bailey has taken a more cautious tone, saying the Bank's position remains reasonable given the unpredictability of the conflict.
Lenders had already started moving
Ahead of that vote, major UK lenders had begun raising mortgage rates to catch up with recent increases in swap rates, according to analysis from Moneyfactscompare.co.uk.
HSBC and NatWest were the first of the biggest banks to reprice since the start of September, with further lenders expected to follow in the coming days.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said pricing margins are under pressure and that adjustment was "somewhat inevitable."
Gilt yields add to the funding pressure
Springall also pointed to the UK 10-year gilt yield, which has risen further above 5% to its highest level in 18 years, adding pressure to the wholesale funding costs that underpin fixed rate mortgage pricing. She linked the move to a global bond sell-off.
Thirty-year gilt yields have climbed as high as 5.79% this year, a level last seen in 1998, with UK debt interest payments now exceeding £100 billion annually.
This is not a new pattern. By late April, the lowest two-year fixed rates from Lloyds Bank, Barclays, HSBC, NatWest and Santander had already moved to between 4.55% and 4.70%; on average, those rates sat around 0.33 percentage points above the two-year swap rate at the time.
A market moving faster than the deals it sells
The scale of lender activity shows up most clearly in how long products stay on sale. The average shelf-life of a mortgage deal fell to 11 days in July, the shortest since April, when repricing compressed it to eight days.
The Moneyfacts Average New Mortgage Rate climbed to 5.59% at the start of August, reversing a fall recorded the previous month, with two- and five-year fixes averaging 5.63% and 5.66%.
Bank of England data tells a similar story over a longer window. The typical two-year fixed rate at 75% loan-to-value rose from 4.20% in December 2025 to 4.92% by July 2026, while the equivalent rate at 90% LTV, common among first-time buyers, climbed from 4.57% to 5.32%.
The margin lenders are reluctant to cross
In late February, the biggest high street banks priced their lowest two-year fixed deals at around 0.29% above the two-year swap rate.
Springall said lenders "look at margins very carefully," and that pricing deals too low would be unwise while expectations point to rates rising, even over the short term.
A 0.25% rise on a typical two-year fixed rate mortgage would add around £38 to monthly repayments, or £456 a year, based on a rate moving from 5.63% to 5.88% on a £250,000 loan over 25 years.
Separate modelling from Moneyfacts puts the impact of a further 25-basis point rise at closer to £13 a month for every £100,000 borrowed, a smaller per-pound figure but one that compounds for borrowers with larger loans.
The average standard variable rate stands at 7.13%, down from 7.42% a year earlier but still well above the SVR's November and December 2023 peak of 8.19%. Springall said choosing a fixed rate deal over falling onto that reversion rate could still save a borrower around £230 a month.
Set against March, and against 2022
Only a small number of lenders have withdrawn fixed rate products from sale since the start of September, among them Family Building Society, in what is understood to be a temporary step.
That is a markedly slower pace than March, when sub-4% fixed rate mortgages all but disappeared and Barclays, HSBC, NatWest, Nationwide and Santander stopped listing them entirely.
Springall said the pressure on swap rates over the past six months has not come from UK fiscal policy, unlike after the 2022 "mini-Budget," which is why current withdrawals and rate rises remain far more limited by comparison.
Brokers are split on timing, too
Nicholas Mendes, mortgage technical manager at John Charcol, said: "I still think in the next announcement a rise is potentially still on the cards, when we look at what's happening in Iran."
He expected only limited near-term lender movement given that swaps had settled slightly. Harry Arnold, director at Anderson Harris, said swap rates were pricing in roughly two further base rate rises at the time of the Bank's last hold, and that a tighter 6-3 vote could push them higher still.
David Hollingworth, associate director at L&C Mortgages, described the volumes seen when swap rates first spiked in March as a "here we go again" moment for brokers, though he noted the market had since stabilised enough to post its steepest monthly fall in nearly two years in June.
Research from L&C found 42% of mortgage holders now name their mortgage their single biggest financial pressure, ahead of food shopping and energy bills.
A regulatory route that softens the timing pressure
Some of that pressure is easier to manage than it looks. The Financial Conduct Authority's affordability stress test rule gives lenders flexibility in how they assess new borrowing, easing pressure on some applications.
Separate FCA switching rules already allow up-to-date borrowers to move to a cheaper deal, including a product transfer with their existing lender, without a full affordability reassessment.
Springall said borrowers should not delay seeking advice regardless of what the Bank decides, and that arranging a product transfer up to six months ahead of a deal's expiry can offer certainty without waiting on the MPC's timetable.
Markets are pricing in at least one base rate rise before the year is out, though economists have suggested any MPC move may not land until November.
Around 1.8 million fixed-rate mortgages are due to expire in 2026, according to UK Finance, many of them deals taken out at below 3% in 2020 and 2021.
Whatever the Committee decides on September 17, that volume of borrowers rolling onto today's pricing, rather than the vote itself, is likely to be the more lasting story for the market over the rest of the year.
