The Budget is out and rates are up. Here’s where that leaves you

The Chancellor delivered the Autumn Budget on 28 October. A week later, on 5 November, the Bank of England raised Bank Rate to 4%, its first rise in three years. Lenders had already moved, and average mortgage rates are at a three-year high. Here’s what changed, what the Budget actually means for your mortgage, and what to do if your deal ends in the next twelve months.

Bank Rate

4.00%

Up from 3.75% on 5 November, the first rise in three years

Average mortgage rate

5.88%

The highest since November 2023, up from 5.83% in early October

Average two-year fix

5.97%

Against 4.83% in January

Extra each month

+£169

On a £250,000, 25-year two-year fix, compared with January

Mortgage rates are at a three-year high

Lenders priced the rise in before the Bank of England had even voted on it. Moneyfacts puts the average mortgage rate at 5.88%, the highest since November 2023, as lenders repriced against volatile swap rates.

The average two-year fix is now 5.97%, more than a full point above where it started the year. Barclays, Nationwide and Halifax trimmed some rates this week, so there is still competition. But for anyone who has been waiting, this year has cost money.

What a year of rises costs each month

£250,000 repayment mortgage over 25 years, at the average two-year fixed rate

The Bank of England raises rates to 4%

On 5 November the Bank raised Bank Rate from 3.75% to 4%, the first rise in three years. All nine members of the Monetary Policy Committee backed a rise: eight voted for a quarter point, and one wanted half a point.

The Bank now expects inflation to peak at around 5% next year, up from 3.2% in its last forecast, as energy prices climb. Markets are pricing in up to three more rises over the next year or so.

• On a tracker, this quarter point adds about £37 a month to a £250,000 mortgage, usually from your next payment.
• On a fixed rate, nothing changes until your deal ends. What matters is the rate you can get when it does.
• On your lender’s standard variable rate, it is up to the lender how much of the rise it passes on, but most follow Bank Rate up.

“Today’s increase shouldn’t be seen as the first in an inevitable long sequence of hikes. But, unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase.”

— Andrew Bailey, Governor of the Bank of England

The next decisions are on 17 December 2026 and 4 February 2027.

The Budget, minus the noise

The Autumn Budget focused on first-time buyers, household bills and landlords. The broad Stamp Duty cut some had predicted didn’t happen.

The bit that matters: the Chancellor doesn’t set mortgage rates. With the Bank expecting inflation near 5% next year, the Budget is not a promise of cheaper borrowing. Plan around your own dates, not the headlines.

House prices dip again before they recover

Savills now expects average UK house prices to fall another 1.5% in 2027, about 3% from peak to trough, with the conflict in the Middle East keeping mortgage rates above 5% until early 2028.

It does not expect a crash. Most homeowners have already absorbed higher borrowing costs, and the jobs market is holding up. Savills forecasts a recovery from the second half of 2028, with prices up 15.8% over the five years to 2031.

Savills UK house price forecast

Annual change in average prices. Up 15.8% over the five years to 2031

Where the opportunities are

• First-time buyers lead. Deposit affordability is the best since 2008, helped by looser stress tests and more room for high loan-to-value lending.
• The North, Wales and Scotland. These are forecast the strongest five-year growth, with Manchester, Leeds, Liverpool and Bristol tipped to do best.
• Houses over flats. Flexible working keeps family homes in demand, while flats face affordability and supply pressure.
• Room to negotiate. A softer market means fewer bidding wars, and more leverage for buyers who are ready to move.

Deal ending in 2027? Start now, not later

With rates expected to stay above 5% until 2028, being ready counts for more than trying to guess the market.

1. Start three to six months out. Many lenders let you secure a new rate months before your deal ends. If rates rise in the meantime, you’re covered. If they fall, we can look again.
2. Don’t drift onto the revert rate. Lenders’ revert rates average around 7%. Moneyfacts estimates that costs about £182 a month more than a two-year fix.
3. Weigh a fix against a tracker. A tracker can be cheaper today, but it rises with Bank Rate. We’ll run both against your budget and your plans. Our two-year or five-year fix calculator is a good place to start comparing fixes.

Dates for the diary

The figures in this article are illustrations only, not a quotation or a personal recommendation. Government schemes and tax rules may change, and support from a scheme does not guarantee mortgage approval. Stamp Duty applies in England and Northern Ireland; Scotland and Wales have their own taxes. We are not tax advisers. Our comments on Stamp Duty, ISAs and landlord tax are general information only, and we make no warranty about what tax you will pay. Please speak to an accountant or tax adviser about your own position. Your home may be repossessed if you do not keep up repayments on your mortgage.

---

Disclaimer:

This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.

While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.