Swap rates keep climbing as specialist borrowers pay for certainty, the lender says
Specialist lender Octane Capital said 85% of the offers it has issued since introducing fixed rates in July have been on a fixed-rate basis, as swap rates continued to climb.
The lender said the take-up points to borrowers placing more value on certainty over borrowing costs. The figure is based on Octane's internal offer data, and the company did not disclose how many offers sit behind it.
Octane's analysis of average daily GBP swap rates, sourced from Investing.com, showed the one-year swap averaging 4.25% so far in 2026, against 4.15% over the same period of 2025. The five-year swap averaged 4.38%, compared with 4.10% a year earlier, a rise of 0.28 percentage points.
Rates have also moved higher since the launch. The average one-year swap rose from 4.33% in the period before Octane introduced fixed rates to 4.49% since, while the five-year swap climbed from 4.45% to 4.74%, up 0.29 percentage points.
Jonathan Samuels, chief executive of Octane Capital, said: "When we introduced fixed rates in July, we did so because we felt borrowers were placing an increasing value on certainty and the response has been pretty emphatic, with 85% of our offers since then going out on a fixed-rate basis."
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Wider market pressure
Swap rates underpin how lenders price fixed-rate products, and the wider market has repriced sharply. Moneyfactscompare.co.uk reported on Oct. 5 that the average two-year fixed residential mortgage rate reached 5.98%, its highest since December 2023, while the average five-year fixed rate hit 6% for the first time in about three years.
Rachel Springall, a finance expert at the site, said lenders were wary of pricing too low while swap rates and wholesale funding costs remained elevated. Barclays raised selected fixed rates four times in September, and HSBC, Lloyds Bank, Nationwide, Santander and TSB each did so three times, Moneyfacts said.
The move reflects pressure in the gilt market. Five-year gilt yields have reached levels last seen in 2008, according to MPA, which also reported that UK borrowing costs are now the highest in the G7.
The Bank of England held Bank Rate at 3.75% on Sept. 17, but three of nine Monetary Policy Committee members voted for an increase to 4%. Inflation rose to 3.1% in August. The next decision is due Nov. 5, eight days after the Autumn Budget on Oct. 28.
Specialist lending slows
Octane said certainty is particularly valuable in specialist property finance, where investors and developers manage refurbishment and build costs, project timelines, sales and refinancing exits. Fixing the cost of borrowing removes one variable, the lender said.
Activity in the sector has softened. Bridging Trends data showed gross contributor lending of £173.1 million in the second quarter, down 15% from £199.2 million in the first. The average monthly interest rate was 0.81%, edging down from 0.82%.
The Bridging & Development Lenders Association (BDLA) reported that bridging and development completions fell to £1.6 billion in the second quarter from £2.3 billion a year earlier. Chief executive Adam Tyler said a slower housing market was putting downward pressure on pipelines, and the association said lenders are looking more closely at how and when borrowers will repay.
Residential and buy-to-let refinancing rates, a common exit, are priced off the same swap markets.
Samuels said the aim was not to predict the direction of rates. "It's not about trying to second guess where rates will go next, but giving borrowers certainty over their cost of finance from day one so they can plan accordingly," he said.
Octane Capital launched in May 2017 and has lent £1.2 billion across 2,500 loans.
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