Update September 2026 - While the numbers in this article are from 2025 - 2026, they remain good examples of how the base rate and swap rates move.
Between February 2025 and February 2026, the Bank of England cut the base rate from 4.50% to 3.75%. That is a fall of 0.75 percentage points, or 16.7%. Over the same 12 months, the best five-year fixed mortgage rate we track fell from 4.19% to 3.79%. That is a fall of 0.40 percentage points, or 9.5%.
Why Mortgage Rates Haven’t Fallen
So why did your mortgage rate not follow the base rate all the way down? Because fixed mortgage rates are not priced off the base rate at all.
A quick bit of jargon first. A percentage point is the gap between two rates, so 4.50% to 3.75% is 0.75 points. A percentage change is that gap as a share of where you started. We use both below and label which is which.
Why does everyone think the base rate sets mortgage rates?
Because the news tells us so. Every decision by the Monetary Policy Committee (the group at the Bank of England that sets the base rate) gets news coverage, and the story is always about what it means for borrowers and savers. And while it may have some influence on mortgages in general, it doesn’t “set” mortgage rates.
What does the base rate actually affect?
The base rate is the Bank of England’s main interest rate. It sets the baseline for borrowing costs across the economy. It has a direct effect on:
- Savings accounts. Rates tend to move in the same direction as the base rate.
- Tracker mortgages. These are the base rate plus a fixed margin, so they move point for point. A 0.25 point base rate cut means a 0.25 point cut in your tracker rate.
- Standard Variable Rate (SVR) mortgages. The SVR is the lender’s default rate. It usually follows the base rate, but the lender decides how far and how fast.
- Discount mortgages. These are a set discount off the lender’s SVR, so the base rate reaches them indirectly.
Fixed rates work differently. Fix for two, five or ten years and your rate stays put whatever the Bank does next. So how does a lender decide what that fixed rate should be in the first place? These are more affected by swap rates.
What are swap rates, and why do they set fixed mortgage rates?
A swap rate is the price lenders pay to lock in their own funding costs for a fixed period, using a financial contract called an interest rate swap that is traded on the markets every day.
When a lender offers a five-year fix at 3.79%, it is promising not to change that rate for five years. To keep that promise safely, it needs to know its own costs for the same five years. The five-year swap rate is the benchmark for five-year fixes, the two-year swap rate for two-year fixes, and so on.
Swap rates move with what markets expect over the fixed period, including:
- Inflation
- Future interest rate moves
- Economic growth
- Global market conditions and investor confidence
Think of crude oil and petrol. Crude can fall 10%, and the price at your local forecourt barely twitches, because refining, transport, tax and retailer margins all sit in between. Base rates and swap rates are related in the same loose way. Swap rates look forward to where markets think rates will be over the coming years. The base rate is today’s decision.
Can mortgage rates stay the same when the base rate falls?
Yes, and August 2025 is the example. On 7 August 2025 the Bank of England cut the base rate from 4.25% to 4.00%, a fall of 0.25 points, in a narrow 5 to 4 vote, as a result borrowers might have expected cheaper mortgages.
Five-year swap rates went the other way. They were 3.96% in early August and 4.02% by the end of the month, up 0.06 points. Lenders cannot price a five-year fix below what it costs them to fund it (because they are businesses that need a profit), so the best five-year rate we track did not budge: 3.90% on 22 July and 3.90% on 20 August.
It can work the other way too. The base rate might hold, or even rise a little, while swap rates fall because markets expect cuts ahead. Fixed rates can then improve.
How did base, swap and mortgage rates compare over the year?
The Three Rates Compared: Feb 2025 - Feb 2026
| Date | Base Rate % | 5yr Swap Rate % | Best 5yr Mortgage Rate (60% LTV) | Mortgage vs Swap |
|---|---|---|---|---|
| Feb 2025 | 4.50 | 4.146 | 4.19 | +0.04% |
| May 2025 | 4.25 | 3.964 | 3.89 | -0.07% |
| Aug 2025 | 4.00 | 4.024 | 3.90 | -0.12% |
| Nov 2025 | 4.00 | 3.89 | 3.85 | -0.04% |
| Dec 2025 | 3.75 | 3.942 | 3.76 | -0.18% |
| Jan 2026 | 3.75 | 4.011 | 3.76 | -0.25% |
| Feb 2026 | 3.75 | 3.994 | 3.76 |
*Best buy is the lowest five-year fixed rate at 60% loan to value (a 40% deposit) with a £999 fee on the dates shown. The base rate is the rate in force on that date. * The base rate was cut to 3.75% on 18 December 2025, nine days after this snapshot. Swap rates are monthly figures for the GBP five-year interest rate swap. Rates vary by deposit size, product and individual circumstances.
Sources: Bank of England; Investing.com (GBP 5yr IRS); NM Finance best buy data.
What does the table tell us?
The base rate fell by far more than swap rates did, and the best mortgage rate landed in between. In August, when the base rate fell and swap rates rose, the best buy stayed exactly where it was. That points to swap rates, not the base rate, as the number to watch.
Mortgage rates did not simply copy swap rates, though. The best buy started the year 0.04 points above the swap rate and ended it 0.20 below. Swap rates are the biggest input to fixed pricing, but lender margins and competition play a part too.
Why did mortgage rates seem stagnant December to February?
Between 9 December 2025 and 10 February 2026, the best five-year fix moved from 3.76% to 3.79%. It was already 3.76% on 9 December, before the base rate was cut to 3.75% on 18 December, and it was still 3.76% on 13 January. That suggests lenders had priced the cut in already.
Many borrowers hoped for further falls in 2026. Swap rates pointed the other way. The five-year swap rate was 3.85% on 4 January and 3.99% on 1 February, up 0.14 points (3.6%) in four weeks, while the base rate stayed at 3.75%.
Markets were weighing up how many more base rate cuts were left. While that stays unclear, swap rates stay elevated and there is little room for fixed rates to fall. If swap rates keep climbing, fixed rates can rise even with the base rate on hold.
Should I wait for the next base rate cut before I fix?
Waiting for a base rate cut to deliver a cheaper fix is not reliable. August 2025 shows a cut can bring nothing at all. Some borrowers waited for rates to “definitely” come down, then came back weeks or months later to rates that were higher or flat.
Nobody times this market reliably, including professional traders with full-time access to it.
If your fixed term mortgage ends within the next 6 to 12 months, you should review your options now. Many lenders let you secure a new rate up to six months before your current deal ends, and if rates fall before you complete, your broker will be able to move you to that deal. But they could also rise, as swap rates did in January 2026, and at least if you’d secured a new deal at the lower rate, before your term was up, you’d still be at that rate.
What does the gap cost in pounds?
Here is an illustration on a £300,000 mortgage over 25 years, repaid (not interest only), ignoring fees. If your rate had fallen by the same percentage as the base rate (16.7%), a 4.19% rate would now be about 3.49%. The best buy is 3.79%.
- At 3.49%: about £1,500 a month, about £90,000 paid over five years.
- At 3.79%: about £1,549 a month, about £92,900 paid over five years.
- The gap: about £49 a month, about £2,900 over five years.
This is an illustration, not a loss. Anyone who fixed in February 2026 paid less than in February 2025 (3.79% against 4.19%). It shows the distance between what a base rate headline implies and what lenders actually offer. The totals are payments only, and you still owe the remaining balance at the end of the five years.
Do any mortgages follow the base rate?
Yes. Trackers move with it, SVRs usually follow it, and discount mortgages follow the SVR. If you are on one of these, a base rate cut should reduce your payments.
Most borrowers moved away from these products because they offer no protection when rates rise. The base rate went from 0.10% in late 2021 to 5.25% by August 2023. Variable rate borrowers felt every step. Anyone on a low fix stayed protected until their deal ended. The price of that certainty is that your rate follows swap rates, not the base rate you keep hearing about on the news.
What do I actually need to know?
You do not need to become an expert in swap markets. You just need to know that a base rate headline is not the price of your mortgage. Part of a mortgage broker’s job is watching the numbers that do set it.
At NM Finance, we monitor swap rates and lender pricing daily and track how funding costs feed into the rates available to clients. When we suggest talking about a remortgage well before it is due, that comes from our knowledge about market movement, not the headlines.
Frequently Asked Questions
Q: What's the difference between base rate and swap rates?
A: The base rate is the Bank of England's current interest rate for overnight lending between banks. Swap rates are the price for lenders to borrow money for fixed periods (2, 5, or 10 years). Lenders use swap rates to price fixed mortgages because they need to lock in their own funding costs for the entire mortgage term. Swap rates are forward-looking and based on inflation and rate expectations; the base rate reflects current policy decisions.
Q: Do any mortgages follow the base rate directly?
A: Yes. Variable rate mortgages including tracker mortgages (base rate plus a fixed percentage), Standard Variable Rates (SVR), and discount mortgages move in line with base rate changes. However, approximately 95% of new UK mortgages are fixed-rate products, which are priced using swap rates instead.
Q: When should I remortgage if rates aren't falling as I hoped?
A: If your fixed term ends within 6-12 months, it's advisable to review options now rather than waiting for rates that may never materialise. You can typically lock in rates up to 6 months in advance. Given swap rate volatility in 2026, securing certainty at current rates often proves more cost-effective than speculation. The August 2025 example shows rates can rise even when the base rate falls.
Q: Where can I find current swap rates?
A: Swap rates are published on financial platforms like Investing.com (search for "GBP 5 Year IRS") and Bloomberg, but they require interpretation and context. Most borrowers benefit from working with a mortgage broker who monitors swap rates daily alongside lender pricing changes and can advise on the best move for you.
The Bottom Line
Base rate headlines make good television and poor mortgage planning. Fixed rates follow swap rates, which look ahead and run on their own timetable.
If your fixed term is ending, or you are buying or remortgaging your home, speak to us sooner rather than later for the widest options of rates. The closer you get to the time you need the mortgage, the more limited your options become.ctors that actually determine available rates and to advise on optimal timing based on individual circumstances.
Have Questions About Your Mortgage?
If you're approaching the end of your fixed term in the next 6-12 months, or need clarity on current rate movements and their implications for your situation, we can help.
We monitor swap rates and lender pricing daily and can explain what's actually happening with mortgage pricing rather than what headlines suggest should be happening.
