Homeowners awaiting the Bank of England's next interest rate decision could be making a costly mistake by concentrating on the wrong figure. The base rate announcement is scheduled for 18 June, with the current rate at 3.75%. In April, the Bank held rates, though one Monetary Policy Committee member voted for an increase to 4%.
Focus on Swap Rates, Not Just Base Rate
Joseph Lane, a mortgage broker at Mortgage Lane, warns that many homeowners and buyers pay excessive attention to the base rate while overlooking the numbers that truly influence mortgage deals. He explains, "People hear 'Bank of England decision' and assume that's when mortgage rates change. But for fixed-rate mortgages, that is often not how it works. The base rate matters, but it is not the only number that matters, and in some cases it is not even the number moving your deal right now."
The crucial figure many borrowers fail to understand is the swap rate. Swap rates reflect market expectations for future interest rates and are a primary factor lenders use to price fixed-rate mortgages. Consequently, lenders may adjust fixed rates before any official Bank of England change.
Why Mortgage Deals Move Without Base Rate Changes
Joseph notes, "A borrower might ask, 'why has my fixed-rate deal changed if the Bank hasn't moved?' The answer is that lenders are pricing risk and future expectations. If markets think inflation will be stickier, or that rates may need to stay higher for longer, mortgage pricing can move before the official decision."
If the Bank holds rates on 18 June, some borrowers may incorrectly assume nothing changes. However, a hold does not freeze mortgage deals. Lenders can still reprice, pull products, launch new deals, or tighten criteria.
Tracker vs Fixed-Rate Borrowers
For tracker mortgage borrowers, a hold typically means payments remain broadly unchanged, as trackers move directly with the base rate. Fixed-rate borrowers face a different scenario. Their monthly payment does not change due to a Bank decision, but the challenge arises when they need a new deal. At that point, market pricing, swap rates, loan-to-value, and lender appetite all become relevant.
A base rate cut would be welcomed, but Joseph warns it would not automatically flood the market with cheap fixed-rate mortgages. "If the market has already expected a cut, lenders may have priced some of that in before the announcement. That means the cut itself might not lead to a dramatic drop in fixed mortgage rates."
The most immediate impact would likely affect tracker or variable product borrowers. Tracker borrowers typically feel base rate changes more directly, while fixed-rate borrowers must consider where the market expects rates to go over the next two, three, or five years—not just one Thursday's decision.
