Mortgage Rates Remain Elevated as Bank of England Expected to Hold Rates

Mortgage costs remain high despite widespread expectations that the Bank of England will leave interest rates unchanged next week.

According to Forbes Advisor UK, the average two-year fixed mortgage rate stands at 5.59%, while the average five-year fixed rate is 5.61%, reflecting the higher borrowing costs facing many homebuyers and those coming to the end of existing fixed-rate deals.

Meanwhile, a Reuters poll of 70 economists found unanimous expectations that the Bank of England will keep Bank Rate at 3.75% at next week's Monetary Policy Committee meeting. Most economists also expect rates to remain unchanged for the rest of 2026, although some forecast either a further increase or a cut depending on how inflation develops.

For borrowers, this highlights an important distinction. Fixed mortgage rates are influenced by lenders' funding costs and expectations for future interest rates, rather than moving directly in line with the Bank Rate. As a result, mortgage rates can remain elevated even if the Bank of England leaves its official rate unchanged.

Anyone approaching the end of a fixed-rate mortgage may therefore find that new deals are more expensive than those available earlier this year. Existing borrowers on fixed-rate mortgages will not see their monthly payments change until their current deal expires, while those on tracker or variable-rate mortgages would only be affected if the Bank of England changes its official interest rate.

Looking ahead, mortgage pricing is likely to remain sensitive to inflation and global financial markets. If inflation continues to ease, lenders could begin offering cheaper fixed-rate deals. However, renewed pressure from higher energy prices could keep borrowing costs elevated for longer.