We partner up with Matt Naish from Faire mortgages to get an insight into the mortgage markets.
Bank of England Holds Base Rate
The Bank of England has again voted to hold the Base Rate at 3.75%, as policymakers continue balancing persistent inflation pressures against weaker economic growth.
While inflation remains above the Bank’s 2% target, markets are increasingly focused on the timing and scale of future rate cuts — or whether rates may remain higher for longer than previously expected.
For borrowers, the key point is this:
Mortgage pricing is now being driven more by swap markets and future expectations than by the current Base Rate itself.
SONIA Swap Rates & Mortgage Pricing
SONIA swap rates — which lenders use to price fixed-rate mortgages — have remained relatively stable in recent weeks following volatility earlier this year. Current 2-year and 5-year swap rates are sitting just above 4.2%.
This stability has helped lenders maintain competitive fixed-rate pricing, although pricing changes remain frequent as markets react to inflation data and global events.
Importantly:
- Fixed mortgage rates can move even when the Bank of England does nothing
- Swap rates are often a better indicator of future mortgage pricing than the Base Rate itself
- Markets are currently pricing in a cautious outlook for future cuts rather than aggressive reductions
Interest Rate Expectations
Markets still expect rates to gradually reduce over the medium term, but expectations have moderated significantly compared to earlier forecasts. Recent inflation data and geopolitical uncertainty have caused lenders and traders to become more cautious about predicting rapid cuts.
For borrowers considering whether to fix now or wait:
- Many clients are still opting for 2-year fixed products to retain flexibility
- Others are securing longer-term fixes for payment certainty
- The “perfect time” to enter the market rarely exists — affordability and long-term suitability remain more important than trying to perfectly time rates
First-Time Buyer Product Update
Lenders continue introducing products aimed at helping first-time buyers overcome deposit barriers.
One of the headline products attracting attention is the recently launched £5,000 deposit mortgage proposition aimed at helping buyers access up to 99% loan-to-value borrowing.
Alongside this, several major lenders have relaxed affordability assessments in recent months, potentially increasing borrowing capacity for some applicants. This could particularly benefit:
- First-time buyers
- Buyers relying on family support
- Home movers needing additional borrowing capacity
What This Means for Buyers
The market remains active, but affordability is still the key issue for many households.
Encouragingly:
- Lenders remain competitive
- Product choice has improved
- More low-deposit options are becoming available
- Affordability calculations are gradually easing at some lenders
However, mortgage pricing can still change quickly, particularly if inflation surprises markets again.
Broker Insight
The current market rewards preparation.
Buyers who secure an Agreement in Principle early, understand their borrowing position clearly, and review options before making offers are generally in the strongest position — particularly in competitive areas.
As always, mortgage advice should be tailored to individual circumstances and objectives.