Is it déjà vu all over again?
The Bank of England has cut its base rate again, but if you’re hoping for an immediate drop in fixed mortgage rates, you might be disappointed. While the headline news screams “rate cut,” the mortgage market doesn’t always react in a way that seems logical at first glance.
So, why is it that fixed mortgage rates haven’t moved much—or at all—despite this cut? Let’s break it down.
Why Aren’t Fixed-Rate Mortgages Dropping with the Base Rate?
Isn’t a rate cut supposed to lower borrowing costs?
In theory, when the Bank of England lowers its base rate, borrowing should become cheaper. But fixed mortgage rates are a different beast. Lenders don’t set fixed rates based purely on the current base rate; they base them on where they expect interest rates to be in the future.
In other words, by the time the Bank of England makes its decision, lenders have already adjusted their pricing based on economic forecasts, inflation trends, and money market rates. So, if markets anticipated this rate cut weeks or months ago, fixed rates were likely adjusted ahead of time. That means you might not see much movement now that the cut has actually happened.
How Do Lenders Price Fixed-Rate Mortgages?
What’s going on behind the scenes?
When you take out a fixed-rate mortgage, your lender is essentially hedging a bet on future interest rates. If they think rates will fall further, they might already have dropped their fixed-rate deals in anticipation. On the flip side, if there’s uncertainty or lenders feel rates could bounce back up, they may hold rates steady for now.
Fixed mortgage rates are influenced by what’s happening in the wider financial markets, particularly something called swap rates. These are the rates at which banks lend to each other, and they’re based on expectations of where interest rates are heading. If swap rates don’t move much after a Bank of England announcement, neither will fixed mortgage rates.
What About Tracker and Variable-Rate Mortgages?
Will these see any changes?
Now, if you’re on a tracker mortgage, you’re in luck (for once). These deals are directly tied to the Bank of England’s base rate, so you should see your monthly repayments come down in line with the recent cut. Variable-rate mortgages, meanwhile, might drop, but it depends on your lender. Some will pass on the cut, others may delay or only pass on a portion of it.
If you’re on a fixed-rate deal, though, your rate stays exactly as it was until your deal expires—no matter what the Bank of England does.
Should You Consider Remortgaging Now?
Is it time to make a move?
If your fixed-rate deal is coming to an end, you might be wondering whether now is the right time to lock in a new one. The answer? It depends.
While the Bank of England has cut rates, there’s no guarantee lenders will make fixed-rate deals cheaper overnight. If markets think rates could fall further, it might be worth holding off a little longer. But if inflation or economic uncertainty cause swap rates to rise, then mortgage rates could stay put—or even go up.
This is where speaking to a mortgage broker can be really helpful. They’ll have their eye on the latest market trends and can help you decide whether to lock in a deal now or wait to see if better rates come along.
Conclusion: Is It Really Groundhog Day for Interest Rates?
If it feels like we’ve been here before, that’s because we have. Every time the Bank of England makes a move, there’s a flurry of excitement about what it might mean for mortgages—only for fixed rates to do… well, not much at all.
The key takeaway? Don’t assume a Bank of England rate cut automatically means cheaper fixed-rate deals. The mortgage market often moves ahead of these decisions, meaning by the time the news breaks, the real changes have already happened.
For borrowers, the best strategy is to stay informed, keep an eye on lender offers, and get professional advice when needed. Because when it comes to interest rates, it’s not just about what’s happening today—it’s about what the market thinks will happen next.
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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.
