We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies as per our policy which also explains how to change your preferences.

Base rate speculation mounts: should you fix your mortgage now?

Find out how rates were affected last time the base rate rose

The base rate could rise in May, after the Bank of England signalled in February that hikes were on the horizon – so should you act now to lock in a mortgage deal?

The Bank of England base rate influences how mortgage providers set their rates for borrowers. Last time the base rate rose, in November 2017, the average rates for fixed deals went up, while many of the best rates were withdrawn, new research from Which? shows.

So, don’t be surprised to see rates increase quickly if the base rate rises. Find out how you can beat a rise.

  • If you want to talk to an expert about the best mortgage for your circumstances, call Which? Mortgage Advisers on 0800 2942 849.

Standard rates rise after base rate

If you’re not on a fixed-rate deal, you may pay your lender’s standard-variable rate (SVR). Following the base rate rise, just over half of providers increased their SVR, adding a significant sum to their borrowers’ monthly payments.

Of the around 90 mortgage providers in the market in that period, more than half (53%) increased their SVR for existing borrowers, with 45 passing on at least 0.24%. For new borrowers, 23 passed on an increase of at least 0.24%.

Does the base rate affect fixed-rate deals?

Choosing a fixed-rate deal can give you certainty over your payments, meaning future rate rises won’t affect your bottom line.

But with the last base rate rise, the rates for fixed-rate deals became less attractive for mortgage borrowers, analysis by Which? found.

Between October and December last year, the average rate for two, three and five-year deals all increased.


For five-year deals, 40% of providers recorded a higher average rate, while a quarter of providers saw their two-year and three-year average rates rise.

In the month following the rate rise, 224 deals were increased – 75 of which rose by more than 0.2%, while 25 increased by the full 0.25%.

Find out more: fixed-rate mortgages

Best deals withdrawn

Overall, 135 deals were withdrawn from offer in December, and among them were some of the most attractive rates.

Three out of the five lowest-rated three-year deals were pulled from the market.

For two-year deals, four of the 10 lowest-rated deals were withdrawn.

Five-year deals fared better, with just one of the 10 best-rated deals taken off the market.

How will an increase affect my payments?

If you’re currently on your lender’s SVR, think about how a 0.25% increase might affect your payments.

As an example, if you’re currently paying around £600 a week at an SVR of 3.99% on a £100,000 loan, a 0.25% rise could add £10 a week to your weekly payments – or £520 a year. A 0.5% increase would add £14 a week, or £728 a year.

You can use the calculator below to work out how that would affect your mortgage rates.


Should I fix my mortgage deal?

There has been mounting speculation that the base rate will be raised in May. It’s impossible to predict how banks will react, but previous evidence suggests that a base rate increase could drive up the rates on fixed-rate deals available.

If you’re currently shopping around for a mortgage, choosing a longer-term fixed rate deal may be a good option. With further base rate hikes in the future, you may benefit from locking in your interest rate now to avoid losing out if rates are raised or withdrawn in May.

A fixed-rate deal with will give you certainty over your interest payments, so you can plan out your budget. But keep in mind that you may not be able to remortgage before your fixed-rate period expires.

David Blake from Which? Mortgage Advisers said: ‘If we see a repeat of last time, and savings rates stay lower than mortgage rates, you should consider putting any surplus funds you might have into your mortgage as an over-payment.

‘You could also consider mortgaging to an offset product if you have savings in reserve, as this could be a good option to maximise their use.

‘Ahead of this expected rise, it’s important to plan ahead and properly understand the impact a rate rise would have on your mortgage payments.

‘Even if you are currently locked into a mortgage product, it’s still worth looking into remortgaging to a long-term fixed-rate to help protect yourself from the financial shock of future rate rises.

‘It’s worth doing your calculations to work out how a reduced interest rate would affect your payments. But don’t forget to factor in fees that you may have to pay to take out a new mortgage deal.

‘Also, keep in mind that banks will often raise rates in anticipation of a rate announcement – so if you want to make a change, start considering it now.’

Will my savings rates increase?

While banks were quick to increase mortgage rates after the last base rate rise, they weren’t so nimble when it came to savings rates.

We looked at 327 variable instant-access savings accounts and Isas, finding that in the five weeks after the base rate rise nearly half (48%) did not see any rate change at all.

Just over one in five (21%) had passed on the full 0.25% rise to customers during the period, nearly a third (30%) of accounts saw a rate increase of less than 0.25%.

Overall, of 95 providers in the instant access savings market, five weeks on from the Bank of England‘s announcement, just one in 10 applied the full 0.25 percentage point rise to all their instant access savings accounts and Isas.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

Back to top
Back to top