The Bank of England’s summer rate moves have kept borrowers guessing — with a cut in August followed by a September pause. But while the base rate grabs headlines, it’s the swap markets that drive mortgage pricing. In this update, we explore what the latest decisions mean for fixed-rate mortgages, and provide a snapshot of UK inflation, house prices, and equity markets in both the UK and US.
Bank of England: August & September decisions
- August 7, 2025: The MPC cut Bank Rate by 25 bps to 4.00% on a 5–4 split vote.
- September 18, 2025: The MPC held at 4.00% (vote 7–2) and slowed quantitative tightening—cutting the annual gilt-sale target from £100bn to £70bn and reducing long-dated sales to 20% to avoid unsettling the gilt market.
- Takeaway: August’s cut was finely balanced; September’s hold signals caution with inflation still above target and an eye on gilt-market stability. Markets now price only a modest chance of another cut in 2025.
What this means for fixed mortgage rates (and swaps)
- UK fixed mortgage pricing is driven by SONIA swap rates (not the base rate directly). After the August cut, 2-year swaps dipped only a touch (~-8 bps) while 5-year swaps were broadly flat, implying much of the cut had already been priced. As September progressed, gilt yields firmed and swaps followed, nudging some lenders’ fixed rates up ~0.10–0.20% despite the lower base rate.
- As of mid-September, average fixed rates cluster around the mid-4s, with Rightmove’s tracker showing ~4.52–4.56% for 2- and 5-year fixes, and weekly updates indicating small, mixed moves by LTV bucket. Expect day-to-day changes to track swaps rather than base-rate headlines.
- Client angle: If you’re within 6–9 months of a remortgage, secure a rate then keep it under review—subtle swings in swaps can move pricing quickly.
Inflation check
- UK: CPI inflation 3.8% y/y (August 2025), unchanged from July; CPIH 4.1%. Services and wages remain sticky versus the 2% target.
House prices
- UK: Private indices show modest annual gains. Halifax: +2.2% y/y in August; average price £299,331; +0.3% m/m. Nationwide’s readings are similar on direction. Cooling swap rates since 2024 supported affordability; recent gilt/swap firming tempers the pace.
- US: Broad trend through summer 2025 remained positive year-over-year with regional dispersion.
Equity markets (YTD, to mid-September)
- UK: FTSE 100 is up solidly year-to-date in 2025 (high single- to low double-digit gains depending on cut-off date), supported by energy, staples and a softer pound at times.
- US: S&P 500 YTD ~12–13% (price), ~13–14% total return by mid-September, driven largely by earnings growth.
Bottom line for borrowers & buyers
- Base-rate optics ≠ fixed-rate reality. Lender fixes move with SONIA swaps, themselves driven by inflation data, gilt supply/demand and BoE guidance.
- Inflation is cooler than 2023 but still sticky. Until UK inflation reliably trends toward 2%, the BoE will proceed cautiously—keeping a floor under medium-term swaps.
- Practical tip: If you’re refinancing within 6–9 months, grab a rate now and revisit; if purchase-timelines are flexible, watch 2- and 5-yr swap moves for entry points.
Client FAQs
· Q: Will my mortgage rate drop because the BoE cut rates in August?
A: Not necessarily. Fixed mortgage rates are linked to swap markets, not directly to the base rate. Swaps can move differently depending on inflation and gilt market trends.
· Q: Why are some fixed rates rising even though the base rate is lower?
A: Because lenders price off swaps, which have risen recently as gilt yields climbed. This can offset the impact of a base rate cut.
· Q: Should I fix it now or wait?
A: If you are within 6–9 months of remortgaging, it’s wise to secure a rate now and keep it under review. Waiting exposes you to potential swap-driven increases.
· Q: What’s driving inflation at the moment?
A: Services and wage growth remain sticky, keeping inflation above the Bank’s 2% target despite lower energy costs.
· Q: How do UK house prices look?
A: They’ve shown modest annual growth (~2% y/y). Affordability has improved versus 2023, but rising swaps could slow momentum.
· Q: How are equity markets performing?
A: The FTSE 100 is up strongly in 2025, while the S&P 500 has delivered double-digit returns year-to-date.
Best Buy Mortgage Rates
First Time Buyers Fixed Rates
| Lender | Rate | LTV | Rate Type |
| Skipton | 4.89% | 95% | 2-year fixed |
| Halifax | 4.33% | 90% | 2-year fixed |
| Clydesdale [professional] | 4.78% | 95% | 5-year fixed |
| NatWest | 4.43% | 90% | 5-year fixed |
Remortgage Fixed Rates
| Lender | Rate | LTV | Rate Type |
| Santander | 4.04% | 75% | 2-year fixed |
| Santander | 3.87% | 60% | 2-year fixed |
| Principality | 4.26% | 75% | 5-year fixed |
| MPowered | 4.09% | 60% | 5-year fixed |
| HSBC | 4.94% | 75% | 10-year fixed |
Buy to Let Purchase Rates
| Lender | Rate | LTV | Rate Type |
| HSBC | 3.87% | 75% | 5-year fixed |
| TMW [SPV] | 4.52% | 75% | 5-year fixed |
PRODUCTS CORRECT AS OF 19.09.25
ALL MORTGAGE RATES ARE SUBJECT TO CREDIT STATUS, INCOME AND AFFORDABILITY.
ARRANGEMENT FEES AND EARLY REPAYMENT CHARGES MAY APPLY TO THESE PRODUCTS THESR ARE FOR ILLUSTRATIVE PURPOSES OF RATES. PLEASE CONTACT AN ADVISER FOR A RECOMMENDATION TO MEET YOUR CIRCUMSTANCES. ALL VIEWS IN MARKET COMMENTARY ARE THE PERSONAL OPINIONS OF THE AUTHOR.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
