Article published 15.11.2024

Mortgage rates have risen despite the Bank of England cutting interest rates in November. The final sub-4 per cent fixed rates on offer from major banks and building societies were withdrawn from the market . So far this week, seven high street lenders have increased their mortgage rates. 

This may have come as a surprise to households with a mortgage - particularly given that the Bank of England voted to cut the base rate from 5 per cent to 4.75 per cent last Thursday.

Why are fixed mortgage rates rising? 

Market expectations about how quickly, and how low, interest rates will fall in future have shifted of late - and this is having a direct impact on fixed mortgage rates. 

The Bank of England base rate is still expected to fall over time, but markets are now questioning if the pace will be as rapid. 

Last year, forecasts for where the base rate would eventually peak fell from a high of 6.5 per cent to 5.25 per cent, mortgage rates shifted with this.

At the start of this year, markets were pricing in six or seven base rate cuts in 2024, with investors betting on rates falling to 3.75 per cent or 3.5 per cent by Christmas.

As you will see from this chart, Capital Economics has changed its interest rate forecast because it now thinks the Bank of England will cut rates more slowly.

Markets are now expecting only three or four interest rate cuts between now and the end of 2025, meaning the base rate would fall to 4 per cent or 3.75 per cent.

This has shifted over the past couple of weeks in particular, as Labour's Budget plan to borrow and spend more has slightly troubled Government debt markets, sending interest rate expectations and gilt yields higher.

There are also fears that Donald Trump's return to the White House could have an inflationary impact on Britain. This could cause the Bank of England to hold interest rates higher for longer.

As always, getting mortgage advice is imperative in this volatile world and planning ahead especially if your current mortgage deal is expiring in the next 3-6 months. Contact us today should you need some guidance.