Mortgage rates see second wave of hikes ahead of this week's Bank Rate decision

A new round of mortgage rate increases has pushed borrowing costs higher, ahead of the next Monetary Policy Committee meeting to vote on Bank Base Rate, according to Moneyfactscompare analysis.

A second wave of mortgage rate hikes has been made by the major banks, off the back of higher swap rates, including NatWest, Santander, HSBC, Lloyds Bank and TSB, all for the second time since the start of September.

As a result, the Moneyfacts Average New Mortgage Rate stands at 5.68%, up from 5.59% at the start of August and remains higher than at the start of March at 4.90%.

Since the start of March, the average two-year fixed mortgage rate has risen by 0.89%, adding £131 to monthly mortgage repayments, or £1,572 per year, based on a rate of 4.84% rising to 5.73%.

Rachel Springall, finance expert at Moneyfactscompare, said: “A second wave of mortgage rate hikes has begun from the major banks in reaction to growing concerns surrounding inflationary pressures. Swap rates have climbed above 4.70%, leading lenders such as NatWest, Santander, HSBC and TSB to increase selected fixed rates for the second time this month. It is highly likely other lenders will follow suit to adjust rates, and with some deals withdrawn from the market, it is expected any returning deals could well be priced higher. Several building societies have also started to price for a second time this week, such as Nationwide, and others have withdrawn and replaced products.

“The average two-year fixed mortgage rate is at its highest point since June, with the average five-year fixed back up to levels not seen since April. This will be hugely disappointing news for borrowers. It demonstrates how fixed mortgage rates are not intrinsically linked to adjustments to the Bank of England Base Rate (BBR), yet mortgage rates could climb even higher if the Monetary Policy Committee (MPC) decide to increase the BBR. If there is a spread vote between the doves and hawks, the Bank of England Governor, Andrew Bailey, will cast the deciding vote. Economists expect a hold this week, and a rise of 0.25% in November. There is also speculation that four out of the five policy decisions between February and July 2027 will see BBR hikes. The total cumulative increase of five rises would add 1.25% to BBR by the end of July 2027, with BBR rising from 3.75% to 5.00%.

“The mortgage pain shows no sign of easing for those borrowers who cannot yet lock into a new deal, particularly those with a five-year fixed who are not due to refinance until 2027. Back in February 2022, there were sub-2% fixed mortgages available, so moving off this rate will be a huge shock for borrowers. In the meantime, it is vital that lenders and brokers help customers understand the implications of ending their deal early, such as early repayment charges. Despite the government’s Mortgage Charter, not every single lender allows customers to lock in a new deal up to six months ahead of the end of a fixed rate deal. Despite this, the popularity of product transfers is clear, as the FCA revealed almost 900,000 mortgages between Q1 and Q2 2026 locked into a deal up to six months ahead of maturity. It would be beneficial for lenders to consider extending their product transfer window for those borrowers who have a shorter window than six months in light of interest rate volatility. Those who secure a fixed rate deal compared to falling onto a revert rate could save £218 each month in repayments.”