The base rate has been held, and inflation is at its lowest level in three years, but mortgage rates have increased.

The Bank of England has held the base rate at 3.75% in today's review. The hold was widely predicted. The Bank has been cautious due to ongoing economic challenges and the current political outlook. It is aiming to bring inflation down to 2%, and it currently stands at 2.6% – the lowest level since February 2023.

An industry spokesperson said that the base rate being held and lower inflation should provide reassurance and confidence to borrowers and lenders.

However, it’s been a challenging time for the mortgage market recently, with average UK mortgage rates rising to levels seen in June. This is due to renewed tensions in the Middle East and uncertainty around the new Prime Minister's spending plans.

Several major lenders have slightly increased their rates. According to Moneyfacts, the average two-year fixed-rate mortgage stood at 5.62% yesterday, compared with 5.48% at the beginning of the month.

What you need to know about Swap Rates

Swap rates – which influence the cost of borrowing for banks and lenders – have also increased in recent weeks. Mortgage pricing is closely linked to swap rates. When they rise, lenders will often pass on the additional cost to borrowers.

What if you're due to remortgage soon?

If you’re due to remortgage within the next year, you may be wondering whether to choose a tracker mortgage, which moves in line with the base rate, or a fixed-rate deal. With a tracker mortgage, you could benefit if the base rate falls, but there is no guarantee that it will – and your payments could increase if the rate rises.

Bespoke mortgage advice is crucial

There is no clear-cut solution, which is why bespoke advice is so important. The right option will depend on your financial position and whether you value the peace of mind that comes with fixed monthly payments or are comfortable with the possibility of rate fluctuations.

Guidance on your mortgage

If your current mortgage deal is due to end within the next seven months, we strongly recommend that you speak to an experienced broker as soon as possible. If you’re coming off a five-year fixed rate deal this year, you may be understandably concerned about much higher payments. There are options available to soften the impact of higher mortgage rates – a good broker will run through them with you.

If you have any questions about your mortgage, we’re here to help.