Moneyfacts, the finance data site, said in the last two weeks some of the biggest high street banks cut fixed rates to catch up with swap rate movements, but the possibility of further cuts was still uncertain.
Barclays, HSBC, Lloyds Bank, NatWest and Santander have been among the big names to lower mortgage pricing, ahead of the Bank of England’s (BoE’s) base rate decision this week.
The conflict in Iran and its impact on inflation sparked the belief that rates would stay higher for longer, resulting in Moneyfacts recording the largest monthly rise in rates since 2023.
At the start of April, average two- and five-year fixed rates were higher than they were last year, and the typical 10-year fixed rate breached 6% for the first time since July 2024.
The average two-year fixed rate was also at its highest point since July 2024, while the five-year equivalent was at its highest since November 2023.
Conversations you need to have with landlords before the Renters’ Rights Act
Sponsored by BM Solutions
However, average two- and five-year rates have fallen slightly over the month, with the typical two-year fixed rate dropping from 5.84% to 5.81% as of 24 April, and the five-year fix from 5.75% to 5.7%.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said borrowers had been “left in limbo” as it was difficult to know whether to lock into a fixed deal now or wait for more sizeable cuts.
She added: “Unfortunately, the outlook on interest rates remains uncertain, so mortgage holders coming off a cheap fixed rate will have to cover higher repayments this year, which will be incredibly frustrating. It is still worth moving off an expensive revert rate, as borrowers could save almost £2,500 a year moving onto a fixed rate deal.
“The BoE refuses to rush any decisions, and with fears of a recession already creeping in, it looks like stagflation has thrown out any plans for cuts this year. Economists expect the BoE base rate to hold in the short-term, and it’s looking increasingly unlikely we will see a cut until 2027.”
|
Mortgage market analysis |
||||||
|
Average mortgage rates |
Apr-21 |
Apr-24 |
Apr-25 |
Mar-26 |
Apr-26 |
24-Apr-26 |
|
Standard variable rate (SVR) |
4.41% |
8.18% |
7.60% |
7.13% |
7.13% |
7.13% |
|
Two-year fixed mortgage |
2.58% |
5.80% |
5.32% |
4.84% |
5.84% |
5.81% |
|
Five-year fixed mortgage |
2.77% |
5.39% |
5.18% |
4.96% |
5.75% |
5.70% |
|
10-year fixed mortgage |
2.93% |
5.77% |
5.63% |
5.61% |
6.01% |
6.14% |
|
Average rates shown are as at the first available day of the month, unless stated otherwise. |
||||||
A close eye on the Bank of England
Since the base rate cut to 3.75% in December last year, the average standard variable rate (SVR) has fallen by 0.14% to 7.13%. However, while the base rate is 0.75% lower than it was a year ago, the typical SVR is down by only 0.47%.
Springall said mortgage repricing could go both ways as swap rates changed, adding: “Mortgage rate hikes have been driven by the conflict in the Middle East, where the disruption of supply chains has created muddied waters for the future path of inflation and interest rate setting.”
She added: “Lenders will be watching the decision by the Monetary Policy Committee (MPC) very closely, as it would be unwise to price deals too low in the short-term, so they will react if swap rates start rising significantly again. At the end of February, before the unrest in the Middle East began, the biggest banks, Barclays, HSBC, Lloyds Bank, NatWest and Santander, had their lowest two-year fixed mortgages priced around 0.30% above the two-year swap rate of 3.33%, but back then, there were also expectations for more BoE base rate cuts.
“This is why borrowers had a decent pool of sub-4% fixed deals to choose from. Base rate tracker mortgages currently look attractive but could be a gamble if interest rates rise this year, so choosing a deal with no early repayment charge would be wise.”
Springall said lenders would reprice to catch up to higher swap rates in the coming days while also competing for new business.
“Until the market sees more stability, there is very little scope for lenders to drop rates substantially due to the prolonged unrest in the Middle East,” she said.