A drop in swap rates following the latest Bank of England base rate cut could soon lead to lower mortgage costs for homebuyers and buy-to-let investors, according to Octane Capital.
The lender analysed recent movements in 5-year swap rates, which have been trending downward since the start of the year. Swap rates, which determine the cost lenders pay to secure fixed-rate funding, directly influence mortgage pricing.
Since the Bank of England reduced its base rate to 4.5%, 5-year swap rates have averaged 4.16%, down from 4.23% between the Autumn Budget and the end of 2024. At the start of this year, they had risen briefly to 4.31% before declining again.
Jonathan Samuels, CEO of Octane Capital, said: “It is, of course, still very early days, but current market indicators suggest that there is light on the horizon for the nation’s home movers and buy-to-let investors and the year ahead is set to be one of far greater positivity when compared to 2024.”
Samuels added: “Not only have we seen swap rates trending downwards so far this year, but this is a trend that will have been strengthened by the Bank of England’s decision to cut the base rate to 4.5% last week and some industry sources are already showing five-year swap rates having fallen below the 4% threshold, which is big news.”
He noted that lenders have started lowering mortgage rates in anticipation of the base rate cut, something that did not happen following previous reductions last year.
“We’ve also seen lenders act with greater confidence, choosing to reduce mortgage rates in anticipation of the recent interest rate cut and this simply wasn’t the case during the closing stages of last year despite us seeing two base rate reductions,” he said.
The average buy-to-let mortgage rate stood at 4.53% in 2024 but has since fallen to 4.38%. Similarly, owner-occupier mortgage rates have declined from 4.81% last year to 4.65% in 2025.
Samuels said the outlook for mortgage affordability is improving and expects this trend to continue, bringing a “much needed boost to property market sentiment.”
