It’s been a month of two halves for mortgage rates.
After several months of generally improving mortgage pricing, the second half of July saw the direction change quite quickly, with a number of major lenders increasing fixed rates.
However, as we moved into August, this trend started to reverse again, with lenders cutting rates and competition returning to the market.
Bank of England Base Rate
The Bank of England’s Monetary Policy Committee voted to keep the base rate at 3.75% at its latest meeting.
Interestingly, the decision was made by a majority of 6–3, with three members actually voting to increase the rate by 0.25% to 4%.
Inflation had fallen to 2.6%, although this remains above the Bank’s 2% target.
The Bank also highlighted continued uncertainty surrounding energy prices and events in the Middle East, with concerns that higher energy costs could feed through into inflation later in the year.
This helps explain why the Bank remains cautious despite inflation having fallen significantly from the levels experienced over recent years.
Mortgage Rates Started to Rise
Mortgage fixed rates had been reducing consistently during the previous few months, but this changed during July.
Initially there were mixed movements, with some lenders reducing rates while others increased them.
However, by the middle of July, the direction had become clearer.
Moneyfacts reported that average fixed mortgage rates had started to rise, with uncertainty surrounding events in the Middle East contributing to changes in market pricing.
This was followed by increases from several major lenders including Nationwide, Virgin Money, Barclays, Halifax, HSBC, TSB and NatWest.
By late July, Moneyfacts reported that average fixed rates had risen back towards levels last seen in June.
Further increases followed, demonstrating just how quickly mortgage pricing can change when expectations around future interest rates and funding costs move.
August – Another Change of Direction
The good news is that the increases didn’t continue for long.
As August began, Nationwide was one of the first major lenders to reverse some of its July increases, reducing selected fixed mortgage rates.
This was followed by further reductions from other major lenders.
NatWest announced cuts across more than 200 mortgage rates, while Santander reduced rates across 230 products.
HSBC also made widespread reductions shortly afterwards.
By the middle of August, Moneyfacts reported that average mortgage rates had fallen for the first time in more than a month.
The downward trend has continued, with Nationwide most recently reducing rates by up to 0.15%, with its lowest fixed rate starting at 4.48%.
Of course, the lowest headline rates aren’t available or suitable for everybody, but the renewed competition is encouraging.
What Does This Tell Us?
Probably the biggest lesson from the last month is just how quickly mortgage rates can change direction.
In July, lenders were increasing rates.
Only a few weeks later, many of the same lenders were reducing them again.
It also demonstrates once again that fixed mortgage rates don’t simply follow the Bank of England Base Rate.
The Base Rate has remained unchanged at 3.75%, yet mortgage rates have moved both upwards and downwards during the same period.
Changes in funding costs, financial markets, competition between lenders and expectations about what might happen to interest rates in the future can all influence mortgage pricing.
Our Thoughts
After several months where mortgage rates had generally been reducing, the increases during July were probably disappointing for borrowers hoping the trend would continue.
However, the fact that lenders have started reducing rates again relatively quickly is encouraging.
It also reinforces why trying to predict exactly what mortgage rates will do next is so difficult.
For people approaching the end of a fixed rate, our usual strategy remains the same.
Where appropriate, start planning early and consider securing a suitable product when it becomes available. This can provide some protection if rates increase, while depending on the lender and circumstances, there may still be an opportunity to switch to a better product if rates subsequently fall.
The important thing is having a plan rather than relying on trying to perfectly time the market.
Information correct at time of writing – August 2026.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.
Easy Street Financial Services Limited is authorised and regulated by the Financial Conduct Authority. FCA No. 1013595.
