Borrowers face uncertainty ahead of tomorrow’s interest rate announcement but shouldn’t be deterred from seeking a deal if the rate is held and should seek broker advice to navigate the changes.

Moneyfactscompare.co.uk says that buyers coming off expensive fixed deals are left in limbo once again. While high street banks such as Barclays, NatWest and Santander have all cut selected fixed rates over the past fortnight in response to swap rate movements, it says that further cuts are up for debate.

Year-on-year average mortgage rates have risen

It points out that year-on-year, average mortgage rates across two-, five- and 10-year fixed rate deals have all risen, with the average 10-year fixed deal breaching 6% for the first time since July 2024 at the start of April. Meanwhile, the average two-year fixed rate reached its highest point since July 2024 and the five-year equivalent rose to its highest since November 2023. The average standard variable rate has fallen by only 0.47% year on year.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Borrowers have been left in limbo as it is difficult to know whether they should rush to lock into a fixed deal or wait and see if lenders make more sizeable cuts.

Worth moving off an expensive revert rate

“Unfortunately, the outlook on interest rates remains uncertain, so mortgage holders coming off a cheap fixed rate will have to cover higher repayments this year. It is still worth moving off an expensive revert rate, as borrowers could save almost £2,500 a year moving onto a fixed rate deal,” she said.

She believes that further cuts this year are unlikely. “Economists expect the BOE base rate to hold in the short-term, and it’s looking increasingly unlikely we will see a cut until 2027. However, borrowers will hope that the mortgage mayhem experienced over recent weeks will calm, but repricing could go both ways amid swap rate moves.”

“Increasing pressures on households have the potential to echo the shocks felt by the UK during the summer of 2023, so the biggest concern for consumers will be how long they need to endure it, particularly for those looking to buy a home or remortgage, as mortgage rates have risen significantly in a short space of time.

“Lenders will be watching the decision by the Monetary Policy Committee (MPC) very closely, as it would be unwise to price deals too low in the short-term, so they will react if swap rates start rising significantly again.

“Lenders will be looking to reprice to catch up to higher swap rates over the coming days, but also to compete for new business; it’s all in the margins. Until the market sees more stability, there is very little scope for lenders to drop rates substantially due to the prolonged unrest in the Middle East. Any borrower concerned about securing a mortgage would be wise to seek advice from a broker to navigate the mortgage maze.”