Why Your Mortgage Rate Went Up When the Base Rate Didn't
A client rang me last week. He'd just had his remortgage quote through and couldn't make sense of it.
"The base rate hasn't moved. So why has my rate gone from 4.3% to nearly 6%?"
Fair question. And he's not the only one asking it. I've had this conversation more times in the last fortnight than I had in the whole of February.
If you've been quoted a higher rate than you expected recently, there's a very simple explanation. It's just that nobody seems to be explaining it properly.
So let me.
Your fixed rate has nothing to do with the base rate
This is the bit that catches everyone out.
The Bank of England base rate is still sitting at 3.75%. It hasn't changed. But fixed mortgage rates have climbed significantly in the last few weeks.
That feels contradictory. If the base rate is the same, why would your mortgage cost more?
The answer is something called swap rates. And before you switch off, it's simpler than it sounds.
When a lender offers you a fixed rate mortgage, they need to borrow that money themselves first. The price they pay to borrow it is based on swap rates. Think of it like a wholesale price. When the wholesale price goes up, the retail price follows.
So the base rate is one thing. Swap rates are another. And right now, swap rates have gone up. Sharply.
So what pushed swap rates up?
The conflict in the Middle East.
When fighting escalated, oil and gas prices jumped. When energy costs go up, everything gets more expensive. Food, transport, manufacturing, heating. That feeds directly into inflation.
And here's the key part: it's not just about what inflation is today. It's about what the market thinks inflation will be over the next two to five years. If the market believes inflation is going to stick around, swap rates climb. Because lenders are essentially pricing in the expectation that borrowing will cost more for longer.
That's exactly what's happened. The conflict pushed energy prices up, which pushed inflation expectations up, which pushed swap rates up, which pushed your mortgage rate up.
The base rate didn't need to move for any of that to happen.
Where rates are sitting right now
To put some numbers on it:
The average 2-year fixed rate is currently around 5.84%. The average 5-year fixed rate is around 5.75%.
And roughly one in five mortgage products has been pulled from the market entirely over the last month. Lenders are repricing and in some cases withdrawing deals faster than they're launching new ones.
Now, you might notice something interesting in those numbers. The 5-year rate is actually cheaper than the 2-year rate. That feels backwards, but there's a logic to it.
The market expects things to calm down over the next few years. Energy prices are expected to stabilise. Inflation is expected to come back under control. So lenders are willing to price 5-year deals a bit lower because they believe the worst of this will pass.
A 2-year deal, on the other hand, covers a period where there's still a lot of uncertainty. More uncertainty means more risk for the lender, which means a higher price for you.
Whether a 2-year or 5-year deal makes more sense for your situation depends on your circumstances. There's no universal right answer, but there is a right answer for you, and that's worth working out properly.
What a real client scenario looks like
A director client came to us last month. His fixed rate was ending and he'd already been onto his existing lender to see what they could offer.
The quote came back at 5.9%.
He wasn't happy about it, but he assumed that was just what rates were now and he'd have to accept it.
We had a different conversation. We searched the market and found him 5.2% with a lender who understood his income structure. He's a limited company director paying himself a low salary with dividends and retained profits. His existing lender was only looking at his salary figure. The lender we placed him with looked at the full picture.
On a £450,000 mortgage, that difference saved him over £260 a month. Over the life of a 5-year deal, that's more than £15,000.
Same person. Same income. Completely different outcome, just because we asked the right lenders the right questions.
If your deal is ending soon, here's what to do
Most lenders will let you lock in a rate up to six months before your current deal ends. That means you don't have to wait until the last minute.
And here's the part that surprises people: if rates come down between now and when your new deal starts, many lenders will let you switch to the lower rate. You're not locked into the higher one. You're essentially protected either way.
So the move right now, if your deal ends in the next six months, is to get a rate secured. If things improve, you benefit. If they don't, you've already got yourself covered.
The worst thing you can do is nothing.
The cost of doing nothing
If your fixed rate has already ended and you haven't sorted a new deal, your lender will have automatically moved you onto their standard follow-on rate. This is the default rate they put you on when your deal expires, and it's almost always significantly more expensive.
We're talking 2 to 3 percentage points higher than the best fixed rates on the market right now. On a £300,000 mortgage, that could mean paying an extra £300 to £500 every single month compared to the best deal you could have secured.
Every month you stay on that rate is money you didn't need to spend.
If you're buying, don't sit on an expiring offer
If you've got a mortgage offer with an expiry date on it, don't assume you can just ride it out and wait for things to improve.
Nobody knows where rates are going from here. The direction depends on how the Middle East situation develops, what happens with energy prices, and how the Bank of England responds. There are people with strong opinions on both sides. But opinions aren't facts, and timing the market is a gamble.
What isn't a gamble is knowing exactly where you stand right now, what your options are, and making a decision based on the actual numbers rather than hope.
Frequently asked questions
Will mortgage rates come down in 2026? It depends on inflation and global events. Markets currently expect some easing over the next few years, which is why 5-year rates are slightly lower than 2-year rates. But nobody can predict this with certainty. The best approach is to secure a rate now and benefit if they drop.
Should I fix for 2 years or 5 years? There's no universal answer. A 2-year fix gives you flexibility to remortgage sooner if rates fall. A 5-year fix gives you certainty and, right now, a slightly lower rate. The right choice depends on your plans, your circumstances, and your appetite for risk.
Can I lock in a rate before my current deal ends? Yes. Most lenders allow you to secure a rate up to six months in advance. If rates drop before completion, many will let you switch to the lower rate.
Why is my lender's new rate so much higher than what I was paying? Your previous rate was agreed in a different market. Rates have moved since then. Your lender's follow-on offer may also not be the most competitive option. It's always worth comparing against the full market.
Do I need a broker or can I go direct to a lender? You can go direct, but a broker searches the entire market, including lenders you can't access directly. If your income is complex, if you're self-employed, or if your situation doesn't fit neatly into a standard application, a broker can often find options your bank simply wouldn't offer.
What to do next
If any of this sounds like your situation, the simplest next step is a conversation. No obligation, no pressure, no sales pitch. Just a clear picture of where you stand and what your options look like.
Book a call with us and we'll take a proper look.
https://www.cikfinance.co.uk/lets-talk
*Your home may be repossessed if you do not keep up repayments on your mortgage. CiK Financial Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited, which is authorised and regulated by the Financial Conduct Authority.