Mortgage rates fall as Bank of England unexpectedly holds UK rates – so should you fix?

Lenders have been steadily reducing rates on their fixed mortgage deals since July, something that's continued following better-than-expected inflation figures published last week.

This downward trajectory on fixed deals is expected to continue, albeit modestly. Furthermore, because market analysts forecast the base rate is at or near its peak, some brokers believe tracker mortgages could represent a good temporary alternative for those not willing to fix yet.

So is it the time to fix or track? Below we round up the latest information. You can also see our Homes and Mortgages Hub for guides and tools to help you get the best deal on your mortgage.

Interest rates on fixed mortgage deals have dropped – and might fall further

For the past few weeks, interest rates on many fixed mortgages have been falling. As you can see from the table below, in July, the top two and five-year fixes were 5.96% and 5.28% respectively. Now these are down to 5.39% and 4.93%.

In fact, last week marked the first time we've seen fixed mortgage deals drop below 5% since mid-summer.

Barclays, Halifax, Nationwide, NatWest, Santander and Virgin Money have all reduced their rates within the past two weeks, while HSBC launched new rates today (Wednesday 27 September). Yet further new deals from these lenders could be on the cards.

My mortgage deal is ending – should I fix or go on to a tracker?

If you need a mortgage deal, whether it's better to fix your mortgage again or move on to a tracker largely depends on when your current deal ends.

• Current deal ending in the next six months? Consider locking in a fixed deal now. Here, you've got more time to wait and see whether interest rates on fixed mortgage deals come down. But you still might want to lock in a fixed deal now, so that you've got insurance against any rate rises and the flexibility to switch to a cheaper deal if one launches before your current rate ends.

  The other advantage of fixing is that it gives you price certainty. No-one knows exactly what will happen to fixed rates, but mortgage brokers believe rates could fall slightly further after better-than-expected inflation figures resulted in a steady improvement to gilt yields and swap rates – long-term interest rate predictors, which affect the cost of fixed mortgage deals.

  David Hollingworth, of broker London & Country, said: "We've already seen improvements in fixed rates and that looks set to continue, or even accelerate, in light of improved inflation figures and a hold in the base rate. After a tough year, there may now at least be some light at the end of the tunnel."

  Though Ray Boulger, of broker John Charcol, cautioned that any further fixed mortgage rate cuts would likely be modest for now. He said: "It will need further falls in gilt yields before we can expect any further significant cuts in the market-leading fixed rates, and as the market is driven primarily by inflation expectations at the moment, the September inflation figures on 18 October will be a key statistic to look out for."

  We've got full details on the pros and cons of locking in a product transfer or remortgage early – including whether you'd be able to ditch it penalty-free – in our Getting ready to remortgage guide.

• Current deal ending imminently? You may want to consider a tracker. Here, there is more of an argument for moving on to a tracker mortgage, temporarily at least. This particularly applies if you believe interest rates will come down over the coming months, as you could get a tracker that doesn't come with early repayment charges and then move to a fixed deal, penalty-free, at a time of your choosing.

  Unlike fixed deals, trackers have a variable rate of interest, typically pegged to base rate fluctuations, meaning what you pay can change. However, as the base rate is thought to be near its peak (somewhere between 5.25% and 5.75%), trackers might not get much more expensive than what they are now (though of course, there's no guarantee).

  Currently, interest rates on two-year trackers are as low as 5.39% – the same as that on two-year fixes, though more than rates on five-year and 10-year fixes (4.93% and 4.94% respectively). Another bonus of trackers moving in line with the base rate is they immediately benefit from any cuts to it (though they can also rise with it) – something fixes don't offer (see the difference between fixed and variable mortgages).

  Mr Hollingworth said: "We can't rule out more changes to the base rate as the decision to hold was a tight vote and much will depend on how the inflation data evolves. Although there are never any guarantees, if the base rate has peaked that will at least help limit the risk of a tracker, and in a higher rate environment some will be hoping there could be base rate cuts to come."

On your lender's SVR? You could save £1,000s with a new deal

According to UK Finance, there are approximately 770,000 homeowners on a standard variable rate (SVR) – the rate you pay once your current mortgage deal comes to an end. SVRs have a variable rate of interest, which means the rate can change at any time – something that tends to happen when the base rate rises.

Two years ago, a typical SVR was around 4%. But the base rate has risen 14 times since December 2021, and in September 2023, the average SVR stood at 8.09%, according to Moneyfacts. Here are the current SVRs of some of the major mortgage lenders:

For many on their lender's SVR, including those who've put off switching in the hope interest rates on fixed deals will come down, you should consider locking in a fixed or tracker mortgage now.

Mr Hollingworth said: "I'd urge borrowers to be really careful about that approach, given the heights that SVRs have typically reached now. Holding off for several months at rates of 8% or 9% in the hope that fixed rates drop slightly could prove to be a false economy."

He added: "Those that think the coming months could bring lower fixed rates could still opt for a tracker without any early repayment charge, which would generally provide a better rate than an SVR but still give the flexibility for them to jump on to a fixed rate when or if they feel the time is right."

Here's how much you'd pay on a typical SVR compared to switching to a fixed or tracker deal:

Don't forget to check for product transfer rates too

When you begin the hunt for a new mortgage, you'll have two options:

1. Getting a new deal from your existing lender (known as a 'product transfer'). When it comes to a product transfer, the vast majority of lenders let you lock in a new rate up to six months in advance. Product transfers are also typically quicker than remortgaging and often require less paperwork. The rates are very competitive at present and there are typically fewer fees involved compared to remortgaging.

2. Getting a new deal from a different lender entirely (known as 'remortgaging'). If remortgaging, most lenders let you lock in a rate at least three months in advance, with many actually letting you secure a deal up to six months early. Though as outlined above, this process can involve more fees and longer, more thorough checks compared to product transfers.

Situation getting worse for mortgage prisoners

Of course, there are many homeowners who are stuck on their lender's SVR, unable to switch to a cheaper deal. We estimate there could be up to 200,000 of these mortgage prisoners, most of whom have 'closed book' mortgages with inactive lenders.

In May, we spoke to two mortgage prisoners who said their lives had been ruined as a result of being tied to an SVR that keeps rising. Their situations have become even worse since then, with one of these mortgage prisoners' SVRs having risen from 8.38% to 9.38%.

For more on what to try if you're a mortgage prisoner, see our I'm a mortgage prisoner guide.