Mortgage Rates Hit 5.6% as Volatility Climbs; Bank of England Decision Looms
Average two-year fixed mortgage rates have risen to 5.59% in early September 2026, up sharply from 4.83% in late February. Market expectations remain divided ahead of the 17 September Bank of England interest rate decision.
Average two-year and five-year fixed rates of 5.59% and 5.63% respectively were recorded on 2 September, reflecting a significant hardening of borrowing costs since spring. Mortgage rates remain volatile amid tensions in the Middle East, while fears over government policy announcements are causing the property market to slow down, with the average two-year fixed-rate deal at 5.59% as of 1 September.
The Bank of England held its base rate at 3.75% on 30 July 2026, with a 6-3 vote: three members of the Monetary Policy Committee voted to increase it to 4%, reflecting growing concern that higher energy prices could lead to more persistent inflation. A renewed rise in wholesale funding and swap rates has put upward pressure on fixed-rate pricing, while the Bank of England has kept Bank Rate at 3.75% since July.
What's Next
- 17 September decision: The next Bank of England announcement will carry weight, with some forecasters tipping a possible rate rise if inflation data released on 16 September proves sticky
- Remortgage pain: The average standard variable rate (which you're moved to after your current mortgage deal ends) is just below 7.35%, which is much higher than the average fixed mortgage rate
Affordability remains a key challenge for first-time buyers and homeowners approaching remortgage. Borrowers with larger deposits (25% or more) and strong credit records continue to receive the most competitive offers.
For expat borrowers and first-time buyers: If you're planning to buy, compare rates now — lenders are competing, but rates can move quickly. Rates of 5.5%+ are now the norm; any improvement from here is uncertain. If you have a deposit of 20% or more and good credit, shop around across at least five lenders. Tracker mortgages tied to base rate are cheaper upfront but riskier if rates rise; fixed rates offer certainty but lock you in at elevated levels. The 17 September decision could shift wholesale markets, so monitor announcements closely.
Sources
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