Fixed rates could fall even if Bank of England raises interest rates, brokers say

As the Bank of England looks set to raise rates to a 15-year high today brokers have claimed that mortgage rates could still continue to fall.

Over the past few weeks, rates have been slowly dropping as money markets calm on the back of better-than-expected inflation data.

And with brokers saying today’s likely interest rate rise is already priced in by lenders as such mortgage costs could continue to fall.

Free PR platform Newspage asked the view of a number of mortgage professionals. Here’s what they had to say.

Rob Gill, managing director at Altura Mortgage Finance:

A base rate hike is very much priced into the majority of lenders’ fixed rates. Up until last month’s inflation figure delivered a lower-than-expected number, a hike of 0.5% was widely expected in August. However, a hike of ‘only’ 0.25% could ease pressure on fixed rates and even encourage lenders to deliver cuts.”

Peter Stamford, director and lead adviser at Moor Mortgages:

“A 0.25% hike by the Bank of England may merely ripple the mortgage pond, but a 0.5% increase could create waves, stirring up the lending waters. Tomorrow is a big day for borrowers and the country in general.”

Darryl Dhoffer, mortgage expert at The Mortgage Expert:

“Looking at the past two weeks, 2-year and 5-year SWAP rates, which influence the pricing of 2-year and 5-year mortgages, have largely remained steady, which implies that lenders have already priced in any rises in fixed rates. I would not expect the majority of lenders to reprice any fixed rates until the next release of inflation figures on August 16th.”

Craig Fish, director at Lodestone Mortgages & Protection:

“The Monetary Policy Committee is fully expected to increase rates by at least 0.25% on Thursday, but this will have no impact on the fixed rates that are available. Most fixed rates on offer right now already have a rate rise factored into them.

“What is going to impact them, though, is the release of the inflation data on the 16th of August and what that does to SWAP rates, which influence mortgage pricing. If, as expected, inflation falls then I suspect we may see more lenders continue to lower rates as we have seen over the last week.”

Lewis Shaw, owner and mortgage expert at Shaw Financial Services:

“Regardless of what the Bank of England does this week, there will be no movement in fixed-rate mortgage pricing because this has already been baked in. Moreover, fixed-rate pricing is less affected by the base rate than by gilt yields, the cost of government debt, which has been stable at a similar level now for two weeks.

“Considering the rollercoaster we’ve been on for the past few months, gilts staying flat over two weeks is manna from heaven, allowing lenders to price mortgages more accurately. My forecast of what will happen with the bank rate is a rise of 0.25% tomorrow.

“We then have inflation data out on 16th August which will show further falls due to the energy price cap being factored in. Luckily the next CPI release is on 20th September, the day before the next MPC meeting on the 21st. So if the September CPI data is still coming down, I think the first hold at 5.25% is on the cards.”

Stephen Perkins, managing director at Yellow Brick Mortgages:

“The Bank of England decision should have no impact on the fixed rates on offer, provided of course they raise the base rate by the expected 0.25% as this has already been priced into the current products based on the swap rates. If the MPC do something more drastic, though, then it could see an upward change in rates.

Rohit Kohli, operations director at The Mortgage Stop:

“Lenders were very quick to increase rates following the surge in swaps rates but have been slower to follow them down. We’ve seen further reductions this week from some major lenders, which leads me to believe that some of the expected Bank of England increase is baked into their products already. However, if we see an increase at the top end, we may see some tweaks upwards in the coming days. But don’t expect major movements in the mortgage market until August’s inflation data is out later this month.”

Elliott Culley, director at Switch Mortgage Finance:

“Thursday’s MPC meeting is the next milestone in the ever-changing landscape that is mortgage rates. Before the July inflation figures were released, a 0.5% increase was expected and the Bank of England had suggested the base rate would need to go as high as 6.5%. When the inflation figures were lower than predicted, this has led to forecasts suggesting we might not need to go as high and a 0.25% rise is now expected.

“The key will be the comments made alongside this rise. If it is suggested that the base rate might not need to go as high, we may see some further reductions. If, however, the base rate rises by 0.5% or the comments suggest the base rate will still need to rise as high as 6.5% we could see mortgage rates starting to rise again.”

Ross McMillan, owner/mortgage advisor at Blue Fish Mortgage Solutions:

“Lenders have largely been slow to reduce rates significantly since the positive inflation data of last month as the effect on the critical swap rates has been relatively minor so far. It does feel like the expected rise of 0.25% has already been factored in and – until the next inflation data is released – a period of rate stability rather than fluctuations is most likely.

“However, should any base rate increase be more aggressive it is a little more uncertain as to how this may impact things. Perhaps more significant than the level of any rate hikes will be the commentary from the Bank of England that surrounds this, as if this were to indicate that further rate rises may not be necessary, it could trigger some respite for beleaguered borrowers and a reduction in rates across all terms heading into the last quarter of the year.”

Graham Cox, founder at

“If, as expected, the base rate only rises 0.25%, it’s unlikely mortgage rates will move higher in my opinion. Rates are already high and the increase is widely expected. That said, the money markets will be interested in how the MPC committee vote is split to gauge current thinking around the inflation and economic outlook, as well as any comments from Andrew Bailey, the Bank of England Governor.”

Lee Gathercole, co-founder at Rebus Financial Services:

“Mortgage lenders have already factored a marginal increase in the base rate of 0.25% into their fixed mortgage rates for 2- and 5-years, so I can’t see any nasty surprises here which will be pleasing for both first-time buyers and homeowners as inflation looks like it is starting to come down. In the unlikely event we see a rise of 0.5% or more then sadly fixed rates will rise again.”

Jonathan Burridge, founding adviser at We Are Money:

“If base rate does rise then the Bank of England is acting as predicted, which the market-makers like, so, it is unlikely that we will see sentiment change. It is encouraging to see that a number of lenders have been reducing their product pricing slightly, so that may continue.

“It will be interesting to see what the markets will do if the MPC decide to hold, that could go either way. It might be a sign that there is confidence that the strategy is working and that might reduce SWAPs, or it may be seen as poor policy, which may send SWAPs up again.”

Jamie Alexander, mortgage director at Alexander Southwell Mortgage Services:

“It appears that the anticipated 0.25% rise has already been taken into account, leading to an expectation of rate stability until the next inflation data is published. However, should there be a more assertive base rate increase, the potential impact on various factors becomes less certain.

“Lenders have shown a reluctance to make substantial rate reductions following last month’s encouraging inflation data. A hike of 0.25% could even ease pressure on fixed rates and encourage lenders to deliver cuts.”

Ben Tadd, director at Lucra Mortgages:

“The widely anticipated rate rise of 0.25% forecast by the Bank of England isn’t expected to have any negative impact on fixed rates, as lenders have already priced in the impending increase within their product margins.

“If the base rate is increased by 0.5% then both shorter and longer term fixed rates are likely to remain stable, if not continue to reduce based on the mini rate-war we have witnessed in the market throughout the last ten days. Only if the base rate is hiked more aggressively by 0.50% might we see a short, albeit small increase to fixed rates, although this is unlikely to be for a sustained period.”

Peter Dockar, chief commercial officer at Gen H:

“Lenders have already factored positive inflation data into their mortgage pricing. If the rate increases by 0.25%, we’ll likely see a gradual decrease in mortgage pricing over the coming months with a few jumps here and there.

“But if the base rate increases by more than the expected quarter percent, ironically, this may have the counter-intuitive effect of driving down pricing on long-term fixed rates. This is because, looking forward, the markets will expect rates to come down faster and deeper as the Bank of England tries to unwind the recession it is deliberately creating in 2024 with its current policy.

“As always, the interesting point will be the tone of Threadneedle Street’s messaging, which will indicate to markets the likely future direction and extent of rate movements in the coming months.”