Over the past four weeks, the yield on two-year UK gilts \u2013 considered a proxy for swap rates, which mortgage prices are based from \u2013 has increased more than 7 per cent. <\/p>\n
With the current two-year yield standing at 4.54 per cent and the BoE’s base rate still at 3.75 per cent, the market is pricing for up to three rate hikes in the coming months \u2013 though these fluctuate regularly and do not always transpire into actual Monetary Policy Committee (MPC) votes to move the base rate. <\/p>\n
However, more analysts have signalled an expectation that a rise will come sooner rather than later, with even the BoE’s own chief economist, Huw Pill, saying this week that rates needed raising<\/a>. <\/p>\n For homeowners needing to renew their mortgage terms, of which there are an estimated 900,000 across the second half of 2026, that is set to mean a notable rise in interest payments if they delay agreeing a new deal \u2013 or, usually a worse situation, move onto their lender’s Standard Variable Rate (SVR). <\/p>\n An SVR is usually what a mortgage deal moves to after its fixed term, for example two or five years, has finished. The rate tends to be higher than fixed deals and will increase or decrease along with any BoE base rate movements, which could mean a double jump of interest payments if homeowners saw deals end right before a base rate hike is voted for. Base rate tracker deals also move up and down in line with BoE rate changes, though are usually lower than SVRs. <\/p>\n Moneyfacts data shows the average two-year tracker rate on Friday is 4.51 per cent, while the average standard variable rate on 1 September was 7.13 per cent. <\/p>\n On a \u00a3250,000 mortgage lasting 25 years, the difference in combined interest and capital payments across deals at those rates is close to \u00a3400 monthly, or \u00a34,760 annually. <\/p>\n If the homeowner in the above example is already on their lender’s SVR and the BoE increases the base rate to 4 per cent, most lenders would pass this on by hiking their SVR accordingly from the following month – meaning a rise of just over \u00a340 per month, or \u00a3483 a year. <\/p>\n This is why most experts and brokers recommend locking in<\/a> a potential deal before an existing one runs out. Most lenders allow you to do this once you are within the final six months of a fixed-term deal. If a better options comes along afterwards before your new deal starts, you can often change to the improved terms. <\/p>\n And if, as is the case this week, lenders start to remove the best deals and replace them with more expensive ones, you’ve already locked in a better option than remains on the market. <\/p>\n