The last month has been another reminder of just how quickly the mortgage market can change.
During August, competition between lenders was helping to push some fixed mortgage rates down and the market appeared to be becoming more stable.
September has seen that trend reverse.
Concerns about inflation and higher funding costs have resulted in a succession of lenders increasing fixed mortgage rates, in some cases more than once during the month.
The Bank of England has now announced its latest interest rate decision, keeping the Base Rate unchanged at 3.75%.
However, with inflation rising again and three members of the Monetary Policy Committee voting for an increase, the outlook has become more uncertain.
August – Mortgage Rates Continue to Improve
The first part of the period continued the more positive trend we saw in last month’s update.
A number of major lenders reduced their mortgage rates during August as competition for new business remained strong.
HSBC reduced a range of residential mortgage rates, while Halifax also announced reductions across home mover and remortgage products.
Further reductions followed across the market, and by the end of August Moneyfacts described mortgage rates as broadly flat during a quieter month.
This relative stability was also starting to have an impact on confidence, with homebuyer search activity increasing as mortgage rates became more settled.
At that stage, the direction of travel appeared reasonably encouraging.
September – The Direction Changes
The beginning of September brought a noticeable change.
Concerns about inflation and movements in the financial markets started to push up the cost of funding fixed rate mortgages.
Lenders responded by increasing rates.
TSB and Barclays were among those to announce increases, followed by Nationwide, which increased selected fixed and tracker mortgage rates by up to 0.20%.
By the second week of September, Moneyfacts reported that fixed-rate mortgage increases were dominating the market.
The increases then continued.
According to Moneyfacts, several major lenders increased mortgage rates for a second time during September, following increases in swap rates.
This included some of the UK’s largest banks and building societies.
The average two-year fixed mortgage rate had increased from 4.84% at the beginning of March to 5.73%, while the average new mortgage rate had risen from 4.90% at the start of March to 5.68%.
This is particularly relevant for borrowers approaching the end of an existing fixed rate, as many people who secured mortgages several years ago will be moving from considerably lower rates onto today’s pricing.
Inflation Rises Again
Inflation has played an important part in the change in expectations.
The latest figures showed that UK inflation increased to 3.1% in August, up from 2.9% in July and moving further above the Bank of England’s 2% target.
Higher motor fuel prices made the largest upward contribution, while housing and household services inflation also increased.
The figures added to concerns that inflation may remain higher for longer than previously hoped.
This matters for mortgage borrowers because fixed mortgage rates don’t simply follow changes to the Bank of England Base Rate.
They are influenced by a range of factors, including financial market expectations, swap rates, lender funding costs and competition.
This means mortgage rates can rise before the Bank of England increases the Base Rate.
That is exactly what we have seen during September.
Bank of England Keeps Base Rate at 3.75%
At its latest meeting, the Bank of England Monetary Policy Committee voted to keep the Base Rate unchanged at 3.75%.
The decision was made by a majority of 6 – 3.
Importantly, the three members who disagreed voted to increase the Base Rate by 0.25% to 4.00%.
The Bank highlighted the impact of continued conflict in the Middle East, which has contributed to higher and more volatile energy prices.
It also noted that UK inflation increased to 3.1% in August and is likely to rise further over the coming quarters.
The Bank said that risks to the inflation outlook are now tilted further to the upside than they were at the time of its July review.
At the same time, the labour market remains relatively soft and higher borrowing costs for households and businesses should help reduce inflationary pressure over time.
For now, the Bank has therefore chosen to keep rates unchanged while continuing to monitor how inflation and the wider economy develop.
What Does This Mean for Mortgage Rates?
Perhaps the most important lesson from the last month is that a Bank of England rate hold does not necessarily mean mortgage rates will stay the same.
During August, mortgage rates were generally improving.
Within a few weeks, market expectations changed and many lenders began increasing their fixed rates.
The Base Rate didn’t change, but fixed mortgage pricing did.
This is why trying to predict the perfect time to secure a mortgage can be difficult.
Mortgage rates are influenced by what financial markets expect to happen in the future, not simply by what the Bank of England does on the day of an interest rate announcement.
Our Thoughts
The change we’ve seen over the last few weeks demonstrates why planning ahead remains so important.
For borrowers approaching the end of an existing fixed rate, particularly those coming off some of the lower rates available several years ago, the difference in monthly payments could be significant.
Waiting for the Bank of England to make its next move isn’t necessarily the answer.
Mortgage rates can move before Base Rate changes, as September has demonstrated.
Where appropriate, starting the remortgage process around six months before an existing deal expires can provide more time to understand the options and potentially secure a suitable mortgage in advance.
Product transfer options with the existing lender can then be compared when they become available, while the wider market can continue to be monitored before completion.
This doesn’t mean mortgage rates will continue to increase.
They could move in either direction as inflation, economic data and market expectations change.
The important thing is not trying to predict exactly where rates will go next.
It’s understanding what the current market could mean for your mortgage, planning ahead and giving yourself enough time to consider the options available.
Information correct at time of writing – September 2026.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.
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