Why Mortgage Rates Are Rising — Even Though the Bank of England Held Its Base Rate at 3.75%

If you've checked mortgage rates recently and noticed them creeping up despite headlines saying the Bank of England left interest rates unchanged, you're not imagining it — and you're not being misled. The base rate and the rate on a new fixed mortgage are two different things, priced by two different mechanisms, and they can genuinely move in opposite directions at the same time.

The Bank of England's Monetary Policy Committee voted 6-3 on 30 July to hold its base rate at 3.75%, with three of the nine members preferring a hike to 4%. That's a notably hawkish split for a decision to simply hold steady, and it reflects a specific tension in the data: headline UK inflation cooled to 2.6% in June, but almost entirely because of falling fuel prices. Strip that out, and the picture looks stickier — core inflation held at 2.6%, and services inflation, the Bank's preferred gauge of homegrown price pressure, eased only marginally to 3.6%. A soft headline sitting on a firm core doesn't give a committee much confidence to ease.

None of that base rate decision, on its own, sets the price of a new fixed-rate mortgage. Variable and tracker mortgages move with the base rate fairly directly. Fixed-rate mortgages don't — lenders price those off SONIA swap rates, a wholesale market rate reflecting where banks expect interest rates to average out over the next two, five, or ten years. A lender offering you a five-year fix today is, in effect, borrowing at something close to today's five-year swap rate and lending it to you with a margin on top. If that swap rate moves before your mortgage completes, the price lenders can profitably offer moves with it — regardless of what the base rate itself is doing that week.

That's exactly what happened this summer. Two-year and five-year swap rates climbed through July as the market priced in a more hawkish Bank of England and continued volatility in energy prices tied to the conflict in the Middle East. Lenders who fund fixed-rate books off those swap curves saw their own costs rise, and several — Halifax among them — passed that through, raising rates by up to 0.20 percentage points on some remortgage products in the days after the July decision.

But the picture since then hasn't been one-directional. Nationwide and Barclays have both cut selected fixed rates within the same broad window, part of a pattern of repeated repricing — up and down — that both lenders have run through much of the summer as swap costs have moved. That's not a contradiction; it's the swap market doing what swap markets do. Tracking services that follow the Bank of England's SONIA swap curve show two-year and five-year swaps eased modestly through the first half of August after their July climb. Lenders don't all reprice on the same day or off the same moment in the curve, so in a volatile stretch like this one, it's entirely normal to see one lender raising rates the same week another is cutting them.

For anyone with a fixed deal expiring in the next few months, the practical takeaway isn't "rates are rising" or "rates are falling" — it's that pricing is genuinely volatile right now, lender by lender, and the base rate headline won't tell you which way your own renewal quote is likely to move. Most lenders let you lock in a new rate three to six months ahead of your current deal ending, which means securing a rate now protects you from a further swap-driven increase, while missing that window leaves you exposed to whatever the curve is doing on the day you actually need to remortgage. Whether that trade-off favours locking in early or waiting depends on how much certainty is worth to you, not on correctly predicting where swaps go next — which, as this summer has shown, even the market itself keeps revising.