If you’ve been watching the mortgage market recently, you might have spotted something that seems counterintuitive. The Bank of England has kept base rate at 4% since August, yet fixed mortgage rates are falling. Halifax cut its rates by 0.20 percentage points last month. Santander and Nationwide have followed suit.
So what’s going on?
Understanding the disconnect
Fixed mortgage rates and the Bank of England base rate aren’t directly linked in the way many people think. While variable rates track base rate closely, fixed rates are priced on something different: swap rates.
Swap rates reflect what the money markets think will happen to interest rates over the coming years. When traders believe the base rate will fall in the future, swap rates drop today. Lenders then pass these reductions on through lower fixed rates, even though the base rate hasn’t moved yet.
Think of it like petrol prices. They change based on future oil price expectations, not just today’s oil price. Mortgage lenders work the same way, constantly adjusting their rates based on future predictions.
What the numbers mean
Let’s make this real. On a £250,000 mortgage over 25 years:
- A rate of 4.50% costs £1,390 per month
- A rate of 4.30% costs £1,360 per month
- That 0.20% difference saves you £30 monthly
Over a five-year fixed term, that seemingly small percentage adds up to £1,800. For a two-year fix, you’d save £720. These aren’t life-changing amounts, but they’re meaningful savings and, as the famous retailer says, ‘every little helps’!
Competition heats up
The mortgage market has become increasingly competitive. Lenders need to hit their lending targets, and with house purchase numbers still below pre-2022 levels, they’re fighting harder for business.
This competition benefits you because banks and building societies are cutting margins to win customers, and relaxing criteria to enable more people to buy, move or borrow more. We’ve seen innovation too, with 100% mortgages returning, and more sensible pricing at 95% and 90% loan-to-value.
Our rate-checking process
Markets move quickly and what is a great rate today might be average next week. That’s why we monitor the entire market daily, tracking over 90 lenders and thousands of products.
Here’s how we ensure you get the best deal:
- Fix early – we will reserve you a rate with your Agreement in Principle (if you are eligible).
- Whole of market search – we find the most competitive rates for your circumstances
- Continuous monitoring – after you’ve got an offer, we keep watching
- Switch if better – if rates improve before completion, we can often switch
Normally, this approach typically saves customers between £1,000 – £2,000 but for some it works out at over £5,000.
Should you wait for further falls?
This is the question everyone asks and, while nobody can predict exact rate movements, waiting carries risks. The home you want might sell, house prices could rise, or rates might actually increase if economic conditions change. From experience, in the world of mortgage rates, good news happens slowly, bad news happens quickly!
Our approach is pragmatic. We find the best rate available today, then keep monitoring. If rates fall before you complete, we try to switch you to the better deal. This gives you the best of both worlds: you get security without missing opportunities.
Action for existing customers
If you’re on a fixed rate ending in the next six months, now’s the time to explore your options. Most lenders let you secure a new rate up to six months before your current deal ends, without any obligation to proceed.
Even if you secured a rate recently yourself, we can check if better deals have emerged. Markets have moved considerably in recent weeks, and that offer from last month might already be outdated.
Next steps
Whether you’re buying your first home, moving house, or coming to the end of a fixed rate, understanding these market dynamics helps you make informed decisions.
We’ll search the whole market, explain your options clearly, and review rates through to completion. That includes checking direct-only deals from banks that don’t work with brokers, ensuring you don’t miss out on any opportunities.
Get in touch for a free, no-obligation consultation where we can review your situation and show you what’s available.
Your home may be repossessed if you do not keep up repayments on your mortgage.
