Why Are Some Lenders Nudging Fixed Mortgage Rates Up Right Now?
Introduction: Confusing Headlines
It feels confusing, doesn’t it?
The Bank of England cut its Base Rate to 4.00% earlier this month — yet some lenders are quietly increasing the cost of their fixed-rate mortgages.
“How can rates be going up,” you might wonder, “if the Bank of England just cut them?”
The answer lies in something you don’t often hear about in the news: swap rates.
Don’t worry — in this blog, we’ll break it down in plain English.
Step 1: What’s a Swap Rate, Anyway?
Think of a swap rate as the wholesale cost of money for banks.
Just like supermarkets buy food at wholesale prices before selling it to you, banks “buy” money in the financial markets before lending it out as mortgages.
For fixed-rate mortgages, that wholesale cost comes from the SONIA swap market (SONIA = Sterling Overnight Index Average).
For example, a 5-year fixed mortgage is priced off the 5-year SONIA swap rate, plus the bank’s margin.
👉 So if swap rates rise, the cost of fixed mortgages usually rises too.
Step 2: Why Have Swap Rates Been Rising Lately?
Over the last few sessions, swap rates have ticked higher — and the reason comes down to government bonds (gilts), inflation, and expectations about the future.
Gilts are rising
A “gilt” is simply a loan investors make to the UK Government.
Right now, 10-year gilt yields are sitting in the high-4%s.
When gilt yields go up, swap rates tend to follow.
Inflation is proving sticky
The latest figures show UK inflation at 3.8% in July, higher than expected.
That tells investors that price pressures aren’t disappearing quickly.
The Bank of England is cautious
Yes, the BoE cut the Base Rate to 4.00% on 7 August, but policymakers signalled they’ll take it slow from here.
That means markets don’t expect rates to tumble — keeping longer-term borrowing costs elevated.
In short: investors think money will stay “expensive” for longer, so swap rates — and fixed mortgage costs — are creeping higher.
Step 3: Are Lenders Actually Increasing Rates?
Yes — but it’s a mixed picture.
Some big-name lenders have nudged up their 2- and 5-year fixes by a few basis points (a fraction of a percent).
Others have actually trimmed certain deals, especially in specific loan-to-value (LTV) brackets.
It’s a moving target every day, depending on how markets shift.
That’s why you’ll sometimes see headlines saying “rates rising” one day and “rates falling” the next — both can be true, depending on which lender and which product you look at.
Step 4: What This Means if You’re a First-Time Buyer
Here’s the good news: small moves in rates are normal. It doesn’t mean you’ve missed the boat or that mortgages are suddenly unaffordable.
But it does mean you should think carefully about timing.
If you’re within 3–6 months of buying, it can make sense to lock in a rate now. Many lenders will let us switch you to a lower rate later if pricing improves before completion.
If you’re earlier in your journey, don’t panic. Markets move up and down all the time. What matters is having a plan, an Agreement in Principle (AIP), and someone keeping an eye on things for you.
Step 5: The Bigger Picture
Here’s the key takeaway:
Bank of England Base Rate = the “retail price” everyone hears about.
Swap Rates = the “wholesale price” that actually sets the tone for fixed mortgage rates.
Even when the BoE cuts Base Rate, fixed mortgages can rise if investors think money will stay costly for years ahead.
Final Thoughts
The mortgage market in 2025 is moving quickly. Rates are being tweaked day by day, and headlines don’t always tell the full story.
That’s why working with a broker matters. At Cambs Ely Mortgages, we:
Monitor swap rates and lender pricing daily
Have access to over 200 lenders
Can often secure you a rate now and switch you to a cheaper one later if the market improves
So whether you’re a first-time buyer or planning your next move, we’ll help you navigate the ups and downs.
📞 Get in touch today to talk through your options.
⚠️ Your home may be repossessed if you do not keep up repayments on your mortgage. Information is correct at time of writing (27/08/2025).
Sources: Bank of England (August 2025 Base Rate decision), ONS CPI (July 2025), FT Markets, Chatham Financial (SONIA swap explainers), Trading Economics gilt data.