The Bank of England has kept its headline interest rate at 3.75%, yet mortgage borrowers are seeing fixed-rate deals become more expensive. So what is going on, and what should you do if you are buying a home or your current deal is coming to an end?
If you thought an unchanged Bank Rate should mean unchanged mortgage rates, you would be forgiven for wondering what has happened to the market.
On 17 September, the Bank of England’s Monetary Policy Committee voted to keep Bank Rate at 3.75%1.
Yet the cost of new fixed-rate mortgages has been moving higher.
In fact, the Bank of England says its measure of quoted rates on two-year fixed-rate mortgages is now around 0.95 percentage points higher than it was before the conflict in the Middle East began earlier this year1.
For borrowers, that can seem contradictory.
It isn’t.
The reason is that Bank Rate is only one part of the story when lenders decide how much to charge for a fixed mortgage.
And right now, the financial markets that help determine the price of those mortgages have been moving even though Bank Rate itself has not.
Bank Rate stayed at 3.75%, but the decision was not unanimous
First, it is worth looking at what actually happened at the Bank of England’s latest meeting.
The Monetary Policy Committee voted six to three to leave Bank Rate unchanged at 3.75%. Three members wanted an immediate increase to 4%1.
The Bank is grappling with renewed inflationary pressure, particularly from higher energy prices1.
UK Consumer Prices Index inflation reached 3.1% in August, above the Bank’s 2% target, and the Bank said inflation was likely to rise further over the coming quarters1.
That does not mean Bank Rate will necessarily rise at the next meeting.
But it does help explain why financial markets have become more concerned about how long interest rates could remain elevated.
And that matters enormously for fixed mortgages.
Fixed mortgage rates do not simply follow Bank Rate
This is probably the biggest misconception about mortgage pricing.
Bank Rate influences borrowing costs across the economy, but lenders do not generally set a two-year or five-year fixed mortgage simply by taking today’s Bank Rate and adding a margin.
Fixed mortgages are much more closely linked to what are known as overnight index swap rates, or OIS rates2.
The Bank of England describes medium-term OIS rates as key reference rates for fixed-rate mortgages2.
You can think of these market rates as reflecting the price of interest rates over the period ahead, together with a premium investors require for uncertainty.
So a lender offering you a two-year fixed mortgage today is interested not just in Bank Rate this morning, but in the expected cost and risk of providing fixed-rate money over the next two years2.
When those market rates rise, fixed mortgage rates can rise too. They can do so without the Bank of England changing Bank Rate at all2.
And those market rates have risen
This is what has happened during 2026.
The Bank of England says UK financial conditions have tightened, driven by increases in short-term OIS rates1.
Its September minutes say those increases have passed through “full and fast” into important borrowing rates for households and businesses1.
The result is that quoted two-year fixed mortgage rates are around 95 basis points, or 0.95 percentage points, higher than before the latest period of geopolitical disruption began1.
The Bank had already recorded the effect in its July Financial Stability Report.
At that point, its average quoted rate on a two-year fixed mortgage at 75% loan-to-value was 4.92%, while the equivalent rate at 90% LTV was 5.32%3.
Those figures were respectively 0.72 and 0.75 percentage points higher than at the time of its previous December Financial Stability Report3.
Those July figures should not be treated as today’s available mortgage rates. Mortgage pricing can change frequently and the rate available to an individual borrower will depend on their circumstances and the mortgage being considered.
But they demonstrate how substantially the market moved.
Does the market think Bank Rate is going up?
Financial markets have certainly become more nervous about interest rates, but there is an important trap here.
The Bank’s September minutes say the UK short-term interest-rate curve had moved higher and was peaking at around 4.9% by the end of 20271.
It would be wrong, however, to describe that as a prediction that Bank Rate will reach 4.9%.
The Bank of England has specifically warned that these market curves include risk premia, effectively compensation investors demand for uncertainty, as well as expectations about future Bank Rate4.
Bank research published in July found that unusually high risk premia were contributing significantly to the upward slope of the UK interest-rate curve4.
So the important message for mortgage borrowers is not that a particular Bank Rate rise is inevitable.
It is that uncertainty about future inflation and interest rates has itself become more expensive.
That can feed directly into fixed mortgage pricing.
What does this mean if you already have a fixed mortgage?
If you are part-way through a fixed-rate mortgage, movements in new mortgage pricing do not normally change the interest rate you are currently paying.
Your fixed rate remains fixed for the agreed period, subject to the terms of your mortgage.
The issue becomes more important as that deal approaches its end.
UK Finance estimated that around 1.8 million fixed-rate mortgages are due to mature during 2026, which means refinancing remains a major issue for households this year5.
For some borrowers, the change could be significant.
The Bank of England estimated in July that nearly 750,000 households paying mortgage rates below 3% were due to reach the end of fixed deals during 20263. It estimated an average monthly repayment increase of around £170 for those borrowers3.
That is an average projection, not what every household will experience.
The actual outcome depends on the remaining mortgage balance, term, loan-to-value, existing rate, new product and individual circumstances.
Should you wait for Bank Rate to fall?
This is where trying to time the mortgage market becomes difficult.
It can be tempting to think: “I’ll wait until the Bank of England cuts rates, then I’ll remortgage.”
But a future reduction in Bank Rate does not guarantee that fixed mortgage rates will fall at the same time or by the same amount.
If financial markets have already anticipated the change, some or all of it may already be reflected in fixed mortgage pricing.
Conversely, fixed rates can rise before Bank Rate increases if financial markets begin pricing in greater inflation or interest-rate risk.
That is precisely why watching Bank Rate alone does not give you the full picture.
For somebody approaching the end of a mortgage deal, the more useful question is usually not “What will Bank Rate do next?” but “What options are available to me, and what would each mean for my monthly and overall costs?”
What if you are buying a home?
The same principle applies to homebuyers.
The headline Bank Rate does not tell you what mortgage rate you will actually be offered.
Rates can vary according to your deposit, loan-to-value, income and expenditure, credit profile, property, mortgage term and individual lender criteria.
A larger deposit may open access to different mortgage options, while fees can also materially change the overall cost.
This means comparing mortgages on headline interest rate alone can be misleading.
The cost of the deal, fees, incentives, repayment structure, early repayment charges and how long you expect to keep the mortgage can all matter.
Don’t panic, but don’t assume nothing has changed
An unchanged Bank Rate can create the impression that the mortgage market is standing still.
At the moment, it isn’t.
The Bank of England’s own data show that market interest rates have risen and that those increases have been passing through to mortgage pricing1.
That does not mean mortgage rates will continue rising. Markets can move in either direction, sometimes rapidly.
It also does not necessarily mean somebody approaching the end of their mortgage should rush into a new deal.
But it does make understanding your position important.
If your existing fixed mortgage is approaching its end, or you are considering buying or moving home, we can review your circumstances and explain the mortgage options that may currently be available.
That allows you to make a decision based on the costs and features available to you rather than trying to predict where interest rates will go next.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount of the fee will depend on your circumstances.
Think carefully before securing other debts against your home/property.
All the information in this article is correct as of the publish date 24th September 2026. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
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Sources
- Bank of England. (2026) Monetary Policy Summary and Minutes, September 2026. [online] Available at: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/september-2026[Accessed 22 September 2026].
- Bank of England. (2026) Monetary Policy Report, July 2026. [online] Available at: https://www.bankofengland.co.uk/monetary-policy-report/2026/july-2026 [Accessed 22 September 2026].
- Bank of England. (2026) Financial Stability Report, July 2026. [online] Available at: https://www.bankofengland.co.uk/financial-stability-report/2026/july-2026 [Accessed 22 September 2026].
- Bank of England. (2026) Bank Rate expectations in the UK curve following the war in Iran. [online] Available at: https://www.bankofengland.co.uk/bank-insights/2026/bank-rate-expectations-uk-curve-following-the-war-in-iran [Accessed 22 September 2026].
- UK Finance. (2025) Mortgage Market Forecasts 2026–2027. [online] Available at: https://www.ukfinance.org.uk/data-and-research/data/mortgage-market-forecasts [Accessed 22 September 2026].