Fixed mortgage rates rising as inflation higher than expected – here's what's happening and why you might want to consider fixing now

Earlier this year, forecasts suggested fixed mortgage rates would continue on their downward trajectory. But experts now say rates are once more rising again, and could carry on doing so. It comes as this month's inflation figures were higher than expected (the Consumer Prices Index is now at 8.7%), while some have predicted that the Bank of England's base rate could rise from its current 4.5% to 5.5% later this year.

To help navigate the market, we've spoken to mortgage brokers and analysed what's going on.

For guides and tools to help you get the best deal on your mortgage, see our Mortgages and Homes section and our Boost your mortgage chances guide. 

Fixed mortgages are getting more expensive – with further price rises 'to come'

Between October 2022 and late April 2023, fixed-rate mortgages had generally been on a downward trajectory, with two-year and five-year fixed deals dropping from 5.6% and 5.24% respectively to 4.08% and 3.79%.

However, since the base rate rose to 4.5% on 11 May – the twelfth consecutive hike in 18 months – and as inflation remains high, fixed mortgage rates have increased. The cheapest two and five-year fixes now start from 4.39% and 4.05% respectively, while – according to price comparison firm Moneyfacts – these fixes now have an average interest rate of 5.38% and 5.05%.

In April, there were numerous five-year and 10-year fixed deals at under 4% but these have disappeared. The number of fixed mortgage deals available in general has also dropped significantly since last week, with a number of lenders – including Accord, Clydesdale Bank, HSBC and Kensington Mortgages – pulling part or all of their fixed-rate ranges over the past few days. These deals will likely return at more expensive rates.

The table below shows how fixed-rate deals – particularly two and five-year fixes – have started to increase in price.

Those on tracker mortgages 'might now need to consider fixing'

As a result of mortgage turmoil caused by the Government's mini-budget last September, tracker mortgages grew in popularity as – for a while at least – they presented a cheaper option than the best fixes. Some trackers also come with the advantage of not having an early repayment charge, meaning borrowers can ditch their tracker when they're ready to fix. 

Yet trackers, which have variable rates of interest and are typically linked to the base rate, have continued to get more expensive each time the Bank of England has hiked the base rate. As a result, the cheapest two-year tracker is now 4.64% and, with further base rate rises expected, trackers could get even more pricey.

The table below shows how trackers have been getting more expensive over the past months.

Where mortgage rates could go from here

Initially it was thought the Bank of England's base rate would peak at 4.5% this summer and begin to come down before the end of 2023 – now some believe it will need to go as high as 5.5%, with it being unlikely to come down this year.

Ray Boulger, of mortgage broker John Charcol, said: "I am dubious about the likelihood of the base rate peaking as high as 5.5%, but it does now look as if any chance of the base rate starting to fall this year is off the table.

"With base rate expectations looking more negative after April's inflation figures and the consequent sharp rise in shorter term gilt yields [one of the main factors that affects the cost of fixed mortgages], most lenders will need to reprice upwards their two and five-year fixed-rate mortgages very soon."

Mr Boulger said he expects two-year fixed deals to start from 5% and five-year deals from 4.5% by mid-June.

You might want to consider fixing your mortgage if you want price certainty

If you're on a variable mortgage and worried about interest rates rising, you might want to consider fixing. David Hollingworth, from mortgage broker London and Country, says this is particularly pertinent for some on trackers with no early repayment charge who might want to "reassess whether now is a good time to fix".

Mr Hollingworth cautioned: "There's lots of rapidly changing information out there with many borrowers holding out for rates to come down – but knowing exactly when that will happen is tough and there are certainly no guarantees. It's often best to think about what's best right now and the rates available at this moment in time."

If you want to insure against interest rates possibly rising, you could lock in today's rate to start as far away as November – and you can often ditch these penalty-free if a better rate comes along in the meantime. However, bear in mind that you may need to pay an up-front fee to secure today's rate, which you might not get back if you ditch your deal before it starts.

See our Getting ready to remortgage guide for more info on the pros and cons of long lock-ins.

Why you should still consider a new mortgage from your existing lender

Where you need a new mortgage deal, you've got two options: switching your deal to a new lender (known as 'remortgaging'), or getting a new deal with your existing lender (known as a 'product transfer').

While not traditionally the case, for the past year product transfers have been highly competitive – in some cases, lenders have actually been offering better rates to existing borrowers than new customers.

Product transfers have two other key advantages:

• Fees are often lower. You'll normally have to pay an arrangement fee, but that's often it. Legal fees are uncommon and you're unlikely to be charged a valuation fee (though this can be the case with remortgages too).

• There's not normally an affordability assessment, which makes the process quicker. So if you're not borrowing more money, this means you could be accepted for a new rate almost instantly. With remortgaging, as affordability assessments form a key part of the switching process, you might struggle to be accepted with a new lender, particularly if you're on the border of affordability, and the process will normally take longer.

See the table below for how far in advance you can lock in a mortgage product transfer. 

Always talk to a broker before you remortgage

For those who need a new deal, speaking to a mortgage broker is vital. As well as advising you about the possible rates you could get, they'll be able to indicate which lenders are more likely to accept you based on your personal circumstances. They'll also be able to advise about whether it's best to remortgage or product transfer.

Read our Cheap mortgage finding guide for more on how to compare mortgage brokers.