Fixed rate mortgages could rise soon as swap rates spike

Mortgage fixed rates could rise as swap rates spike

Mortgage borrowers hoping fixed rates will continue to fall may need to act quickly after a sharp rise in the swap rates lenders use to price mortgage deals.

Two- and five-year swap rates have risen sharply over the last few days as renewed geopolitical tensions, higher energy prices and inflation concerns have unsettled financial markets. 

The rise is particularly notable because swap rates have moved above levels seen during earlier fears surrounding the Iran conflict.

Will mortgage fixed rates go up?

So far, major high-street mortgage lenders have not changed their rates, but some of the smaller lenders have. However, if swap rates remain at their current levels, we expect lenders to start increasing at least some of their fixed-rate deals.

Aaron Strutt, product director at Trinity Financial, says: "We have seen this pattern many times over recent years. Mortgage pricing can remain relatively stable for a period even while funding costs rise, before lenders suddenly withdraw their cheapest products and replace them with higher rates."

Nationwide recently reduced its lowest two- and five-year fixed rates to just below 4.5%, and the building society is offering some of the most competitive rates on the market. Barclays still has a sub-4% two-year tracker, and the next Bank of England base rate decision is on 17 September 2026.

Should borrowers secure a mortgage rate now?

Anyone buying a property or remortgaging over the coming months may want to review their options sooner rather than later.

In many cases, you can secure a mortgage deal several months before you need it. If rates subsequently fall before completion, our brokers can check whether a cheaper product becomes available.

The mortgage market remains extremely sensitive to movements in swap rates, inflation expectations and geopolitical events. Borrowers should therefore avoid assuming today's cheapest fixed rates will still be available tomorrow or in a few days' time.

Approximately 900,000 UK homeowners are rolling off fixed-rate mortgage deals in the second half of 2026, making up half of the 1.8 million total borrowers facing a refinancing payment hike this year. This is according to UK Finance.

According to Compare The Market, "Any of these homeowners who move onto their current lender’s standard variable rate (SVR) could see their monthly payments jump to £1,432 – a £283 increase, based on an average mortgage debt of £200,250.

"This is equivalent to paying £17,184 annually compared to £13,788 on their previous two-year fixed rate, meaning they could be paying more than £3,000 extra each year."

BBC reports long-term government borrowing costs have risen 

The BBC reports long-term government borrowing costs have risen to a 28-year high, putting further pressure on Prime Minister Andy Burnham and Chancellor John Healey, ahead of their  Budget next month.

The BBC says: "The yield on a 30-year gilt — a loan to the British government — rose to 5.89% on Tuesday, the highest since 1998. Borrowing costs in the US, Japan and Europe have hit similar highs in recent days, reflecting investors' concerns about inflation, state borrowing levels and spending levels by large tech companies on AI."

Trinity Financial's brokers have access to high-street banks, building societies, specialist lenders and private banks and can help borrowers compare the latest fixed and tracker mortgage options.

Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire. 

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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