Key facts
- UK mortgage rates are at a five-month high.
- Swap rates have reached a three-year high.
- The Bank of England held its base rate at 4.25% on August 6, 2026.
- Three members of the Bank of England's Monetary Policy Committee voted for a rate increase last month.
- Two members voted for a rate cut at the August 6, 2026 meeting.
- The average two-year fixed rate mortgage is 5.59%, and a five-year fixed deal is 5.63%.
UK mortgage rates are climbing to a five-month high, driven by volatility in international bond markets and rising swap rates, which lenders use to price loans. This increase comes ahead of the Bank of England's latest interest rate decision.
Swap rates have reached a three-year high, prompting institutions like Coventry Building Society to raise their mortgage offerings. Last month, the Bank of England maintained its base rate at 3.75%, though three members of the nine-strong Monetary Policy Committee (MPC) voted for an increase. Huw Pill, the Bank's Chief Economist and an MPC member, has indicated a preference for prompt action to address current uncertainties.
In its August 6, 2026 meeting, the MPC voted to hold the Bank Rate at 4.25%, marking the third consecutive hold. The decision was not unanimous, with two members dissenting and advocating for a 25 basis point cut, reflecting concerns about a weakening labor market amid persistent services inflation. Governor Andrew Bailey stated that monetary policy remains restrictive and the Bank forecasts inflation above its 2% target until early 2027.
Market reaction to the hold was muted, with sterling strengthening slightly against the dollar and gilt yields decreasing. The FTSE 100's banking index saw a modest rise. For tracker mortgage holders, payments remain unchanged, while variable rate borrowers continue to pay higher rates. The average two-year fixed rate mortgage is currently 5.59%, and a five-year fixed deal stands at 5.63%, according to Moneyfacts.