The Bank Held Rates. Fixed Mortgages Didn’t

The Bank of England held Bank Rate at 3.75% in September.

Fixed mortgage rates kept rising. Since March, the average two-year fixed rate has climbed from 4.84% to close to 5.8%, according to Mortgage Introducer. On a £2 million mortgage, movements of that scale are not background noise. They can materially change the cost of refinancing. So why are mortgages becoming more expensive when Bank Rate has not moved? Because the rate dominating the headlines is not necessarily the rate borrowers should be watching.

Fixed mortgages are heavily influenced by swap rates, which move with expectations for where interest rates are heading next. Those expectations change every day. By the time the Bank of England announces its decision, mortgage markets may have moved weeks earlier. That creates a problem for anyone approaching a refinance. Wait for the next Bank of England meeting and you may have more information. But the mortgage you could secure today may no longer be available at the same price.

For large borrowers, the question is therefore not simply “What will the Bank of England do next?” It is “What is the market already telling me, and what does it cost me to wait?”

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The Financial Conduct Authority does not regulate some forms of buy-to-let mortgage.

The hold isn't the whole story

At first glance, September's decision looked uneventful. Bank Rate stayed at 3.75%. The vote told a different story. Bank of England notes that six members of the Monetary Policy Committee voted to hold. Three - Megan Greene, Catherine Mann and Huw Pill, wanted to raise rates immediately to 4%.

Why?

Inflation had risen from 2.9% in July to 3.1% in August, moving further above the Bank's 2% target. Higher energy costs and the approaching pay-setting round raised another concern: that today's inflationary pressures could prove harder to contain than expected. For mortgage borrowers, the significance is not that three policymakers wanted higher rates. It is that markets can react to that risk before the Bank does. Every inflation release, wage figure and shift in expectations can change what markets think interest rates will look like over the next two, three or five years.

Those expectations feed into the cost of funding fixed mortgages.So, while Bank Rate sat at 3.75%, the market underneath it was moving. A hold is not the same thing as stability. And that helps explain how a borrower can wait for a Bank of England decision, get exactly the decision they expected, and still find that their mortgage has become more expensive.

You can get the Bank of England right and still pay more

This is the part borrowers can easily miss. Fixed mortgage rates do not simply follow Bank Rate. They are heavily influenced by swap rates, essentially, the market's view of where interest rates are likely to sit over the period a lender is fixing its pricing. That makes them forward-looking. When expectations change, swap rates can move immediately. Lenders' funding costs move with them. Mortgage products can then be repriced without Bank Rate moving at all.

We have already seen the effect. Since March, the average two-year fixed mortgage rate has risen from 4.84% to 5.8%.  For someone refinancing a large mortgage, even a fraction of that movement matters. A 0.25 percentage point increase on a £2 million loan equates to £5,000 a year in additional interest before allowing for amortisation or differences in structure. On £5 million, it is £12,500.

Suddenly, waiting for the next Bank of England meeting is not a neutral decision. You might wait, correctly predict that Bank Rate will be held, and discover that the mortgage you could have secured weeks earlier is now more expensive. That does not mean every borrower should fix today. It means waiting has a price, and on a large mortgage, that price is worth knowing before you decide to pay it. Furthermore, fixing early has its own considerations. Depending on the mortgage, securing a fixed rate may involve arrangement fees, early repayment charges or other restrictions if circumstances change or the borrower wants to exit the deal before the fixed period ends. The decision therefore needs to weigh the potential cost of waiting against the cost and flexibility of committing earlier.

Our aim isn't to predict rates. It's to preserve your options. If waiting has a cost, does that mean borrowers should fix now? Not necessarily.

For Islay Robinson, Group CEO of Enness Global, that is the wrong way to frame the decision.

“Borrowers can become too focused on getting the next interest rate decision right. That isn't really the objective.

“If you have a large mortgage coming up for refinancing, you want to know what you can secure today, what it costs you to wait and what flexibility you retain if the market subsequently moves in your favour.

“On a £2 million or £5 million mortgage, small movements in pricing become meaningful very quickly. I would rather a client make a financing decision with those numbers in front of them than make a bet on what nine people at the Bank of England will decide at the next meeting.”

For complex borrowers, preserving that flexibility can matter as much as securing the lowest headline rate. A two-year fix, five-year fix and variable facility each create different options. Private banks and specialist lenders can also take very different views on the same borrower, depending on their income, assets, leverage and wider relationship with the bank. So, the decision is bigger than fix or wait.

It is about understanding what you can secure today, what you risk by waiting, and whether the structure still works if your view of the market turns out to be wrong. The objective is not to predict the market perfectly. It is to avoid building a financing strategy that depends on you being right. 

The same borrower can get a very different answer.

Two lenders can look at the same borrower and reach very different conclusions. One may reduce the amount it is prepared to lend. Another may be actively looking for that exact type of transaction. That difference becomes particularly important for high-net-worth borrowers, where affordability may depend on multiple income streams, significant assets, international wealth or more complex ownership structures. Private banks and specialist lenders do not move as one market. They make their own decisions about funding costs, risk and where they want to deploy capital.

So, the lender with the lowest headline rate is not always the lender offering the strongest overall solution. Another may accept a higher loan-to-value, take a broader view of income, consider assets held across jurisdictions or offer greater flexibility around the structure of the facility. And appetite can change quickly. A lender that looked highly competitive three months ago may no longer want the same business today. Meanwhile, another may have become more aggressive on pricing or leverage.

That creates a second risk for borrowers who wait. It is not only that rates might move. The lender willing to do the deal, on the terms you need, might change too. Starting the refinancing process early therefore does more than provide time to compare rates. It reveals where appetite exists while there is still time to use it. Because in a moving market, knowing the rate is only half the picture. The other half is knowing who still wants to lend. 

For landlords, a higher rate can change more than the repayment 

For buy-to-let borrowers, there is another consequence. A higher refinancing rate does not just increase the monthly cost. It can change the deal itself. Lenders assess rental income against borrowing costs. As rates rise, interest cover calculations can tighten, potentially affecting how much a landlord can borrow or the structure a lender is prepared to offer.

For a landlord refinancing one property, that matters. Across a larger portfolio, the effect can multiply. And just as with residential mortgages, buy-to-let lenders have different appetites for leverage, rental coverage, property type and ownership structures. Waiting therefore creates exposure to two moving variables: pricing and availability. That changes the question from “Could rates be lower in a few months?” to something more important: “Will the financing I need still be available on the terms I need it?”Because refinancing risk is not only the risk of paying more. It is discovering that the deal you were waiting for is no longer there.

A lot can move before the Bank does

The next Bank of England decision is on 5 November. Mortgage pricing will not stand still until then. Before the MPC meets again, markets will have more inflation data to digest, further evidence on wages and energy prices, and the Autumn Budget on 28 October. Any one of those could change expectations for where interest rates go next. And that is the point.

Borrowers do not need to predict every inflation figure or second-guess the Budget. They need to understand how the market reacts when new information arrives. If expectations change, swap rates can move. Lenders can reprice, withdraw products or change their appetite before the Bank of England has cast a single vote. So, between now and November, Bank Rate itself may be one of the least interesting numbers to watch.

For anyone approaching a refinance, three signals matter more: where swap rates are moving, how lenders are repricing and where lender appetite is changing. Together, they reveal something the headline Bank Rate cannot: what borrowing actually looks like today. And there will always be another data release, Budget or MPC meeting that promises more certainty. The problem with waiting for clarity is that the market rarely waits with you.

 

Some forms of buy-to-let mortgage are not regulated by the Financial Conduct Authority.

This article is provided for general information only and does not constitute financial advice. It does not take into account your personal circumstances. You should seek independent, personalised advice before making any financing decision.

Rates and figures referenced in this article are correct as at 22/09/26 and are subject to change. Mortgage rates, lender appetite and product availability can move at short notice and without prior notice from the Bank of England or wider market.

Figures used are illustrative only, based on the stated loan amount and rate movement, and do not account for individual circumstances, amortisation, product structure or fees. Actual costs will vary by borrower and should not be relied upon as a quote or guarantee.

Nothing in this article should be read as a prediction of future interest rate movements, lender decisions or product availability. Past rate movements are not a reliable indicator of future rate movements.

Rate data referenced from Mortgage Introducer, 21/09/26 Bank of England data from the Monetary Policy Summary and Minutes, 17/09/29.