How the Bank’s gilts decision might move mortgage interest rates
With Thursday's rate hold already covered, the remaining question for brokers now is what actually changes for clients, and the answer has less to do with Bank Rate than with what the Bank of England did to its bond-selling programme in the same announcement.
Fixed rates: don't expect an immediate rally
The Bank Rate staying at 3.75% does nothing for fixed-rate pricing on its own, fixed deals are priced off swap rates, not Bank Rate, and swaps had already moved well ahead of Thursday's decision. Nicholas Mendes, mortgage technical manager at John Charcol, made this point clearly in the run-up to the announcement: lenders had been repricing upward for weeks in anticipation of a possible hike, and a hold "does little on its own to reverse the pressure on fixed mortgage pricing."
What could move the needle is the other half of Thursday's announcement: the Bank's decision to stop actively selling long-dated gilts into the market and instead let its remaining holdings run down to zero by September 2034. That triggered a real rally in long-end gilt yields on the day, causing the 30-year yield to fall as much as 12 basis points off levels not seen this century, with shorter-dated gilts easing too (these are day-of moves and worth checking against live pricing before quoting to clients, as they can shift quickly).
If that lower-supply effect holds rather than reverses, it should feed through to the swap curve over the coming weeks and take some heat out of five-year and longer fixed pricing in particular, since those products are most sensitive to long-end yields. Two-year fixes, which track shorter-dated swaps more closely, may see less benefit.
The caveat: one day's gilt rally is not a trend, and the Bank has stressed the change is technical rather than a signal about where Bank Rate is heading. Brokers advising clients on remortgage timing should treat this as a reason to watch swap pricing closely over the next fortnight rather than a green light to promise falling rates.
Read next: Borrowers face renewed uncertainty as lenders reprice fixed mortgage deals
Trackers and SVRs: no change, as expected
Anyone on a tracker or Bank Rate-linked deal sees no movement at all, that's not surprising, since the Bank Rate itself didn't move. Standard variable rates, which move at lender discretion rather than automatically, are also unlikely to shift in the short term. Worth flagging to clients: SVRs have historically lagged base rate changes in both directions, so there's little reason to expect lenders to move here off the back of Thursday's decision alone.
The commercial and buy-to-let angle
The gilt yield move matters more, proportionally, for buy-to-let and commercial borrowers, where longer-dated funding costs and swap pricing tend to play a bigger role in underwriting. Duncan Kreeger, chief executive of bridging and commercial lender TAB, welcomed the hold on the grounds that rising bond yields were already doing some of the economy-cooling work a rate rise would otherwise do. That’s a dynamic that, if the gilt rally sticks, could ease slightly for landlords who've been squeezed by both higher borrowing costs and continued regulatory change.
Read next: Landlord exodus accelerates across UK rental market
What to watch next
Two dates matter more than Thursday's decision now. The next MPC meeting is in November, and the Autumn Budget lands on Wednesday 28 October, Chancellor John Healey's first, where any fiscal surprises could move gilt yields (and therefore swap-driven fixed pricing) more than the Bank's own guidance will.
Brokers with clients weighing whether to lock in a rate now or wait should treat the next few weeks, not Thursday's announcement, as the real decision point.
Read next: Mortgage industry split on MPC as rate hike threat grows
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