My two year fix ends in August. When I took it out two years ago the rate was 4.89% which felt painful at the time. Now the best I can find for a like-for-like two year fix is 5.38%.
Bank of England held at 3.75% yesterday. So why are mortgage rates higher than when base rate was 5.25%? The spread between base rate and actual lending rates has ballooned. Lenders are pricing in risk that the MPC won’t even admit to publicly.
One MPC member voted to raise. Let that sink in.
So the question. Do I lock in now at 5.38% and accept it. Or do I wait until July and hope something shifts. Broker says most lenders let you lock a rate 6 months ahead but the ones he’s quoting me don’t seem to be offering that.
Anyone else in this position right now? Or has anyone recently remortgaged and regretted waiting?
The spread between base rate and mortgage rates reflects lender funding costs and swap rates, not just the base rate itself. Swap rates have been climbing since February on the back of inflation expectations and geopolitical risk. The MPC holding at 3.75% tells you nothing useful about where two year fixes will be in three months, because lenders are already pricing in where they think rates are going, not where they are. The fact that one member voted to increase is a signal the market had already absorbed, which is why your broker is quoting 5.38% and not 4.5%. If you wait until July and inflation prints higher than expected in June, you could easily be looking at 5.6% or worse. From recollection the last time we saw this kind of divergence between base rate and fixed mortgage pricing was late 2022, and people who waited then regretted it. I would lock in what you can get now and treat it as insurance rather than a prediction.
Fair point on swap rates. But here’s the thing. My broker is telling me to lock in now because ‘rates could go higher’. Brokers always say that. They get paid when you sign.
Nationwide and HSBC apparently started cutting this week. If lenders are cutting, why would I rush to lock in at 5.4%? Seems like the direction might actually be down in the short term even if the MPC is hinting otherwise.
Lenders cutting from where though. They hiked massively after February and now theyre giving a bit back. Doesnt mean theyre heading to 4%. The MPC had someone vote to raise on Thursday. Thats not a dovish signal.
Nobody knows. Lock in if you cant afford the risk of it going up. Wait if you can. Thats really all there is to it.
My broker said the exact same thing back in April when i was sorting the mortgage for the place i’m buying. Lock in now, could go higher, blah blah. I locked in at 5.31% on a two year fix and honestly i still feel slightly sick about it. Two years ago you could get sub-4% without breaking a sweat. The spread between base rate and what we’re actually paying is mad right now, 3.75% base and 5.4% retail? That’s lenders printing money. I get that swap rates are elevated because of the geopolitical stuff but at some point that has to correct, surely. tbh if i were in your shoes @CyclingChap47 i’d probably lock in just for the certainty, but i wouldn’t feel good about it.
5.31% already looks steep given the last three weeks of cuts. Moneyfacts had the average two year fix at 5.67% a week ago, already dropping. If lenders keep trimming through May you could see sub-5% by the time my fix actually ends in August. Or not. Nobody knows. But locking in now at 5.4% when the direction is finally moving the right way feels like paying a premium for certainty I might not need.