Mortgage rates jump ahead of Bank of England's September interest rate decision

Borrowers coming to the end of their mortgage are set for a shock as rates surge amid fears costs could climb higher yet.

Major lenders including NatWest, Santander, HSBC, Lloyds and TSB have issued a second round of fixed rate mortgage increases in September.

Since the start of March 2026, the average two-year fixed mortgage rate has risen by 0.89%, adding £131 to monthly mortgage repayments, or £1,572 per year, according to Moneyfacts.co.uk.

It comes as inflation jumped to 3.1% ahead of this week's Bank of England interest rate announcement.

The base rate is currently at 3.75% and policymakers could hike the rate higher on 17 September to help combat the rising cost of living - through market forecasts suggest the Bank will not act until later this year.

However, mortgage rates are driven largely by markets which often move in anticipation of the bank rate rather than waiting for it to rise.

This is why we are seeing more lenders now increasing rates.

Mortgage rates rising in September

The average two-year fixed mortgage rate has risen to 5.77%, its highest level since May, according to the latest figures from data site Moneyfacts.

The average five-year fixed rate has also jumped to 5.83% which is a level not seen since November 2023.

Moneyfacts mortgage expert Rachel Springall said: “A second wave of mortgage rate hikes has begun from the major banks in reaction to growing concerns surrounding inflationary pressures.”

Inflation jumped to 3.1% in August, up from 2.9% in July, figures from the Office for National Statistics showed.

This is largely due to the rise in oil prices which has been affected by conflict in the Middle East.

When inflation rises, the Bank of England tends to increase interest rates to help try to bring the cost of living back down.

The Bank aims to keep inflation running at 2%.

Policymakers will be keeping a close eye on the latest figures and deciding whether the base rate - currently at 3.75% - needs to increase.

Borrowers are now being warned to expect mortgage rates to keep on increasing over the coming days and weeks.

Should you fix your mortgage early?

If your fixed-rate mortgage is due to end soon, now is the time to check your options.

You can lock in a rate up to six months ahead of time which can offer some protection if mortgages costs keep quickly climbing.

The Bank of England has estimates that around 750,000 households with fixed-rate mortgages expiring in 2026 are currently paying rates below 3%.

For these borrowers, moving on to a new deal is already set to mean a big jump in monthly repayments.

David Hollingworth, associate director at broker L&C Mortgages said: “Jittery markets could mean further tremors for mortgage rates, and several lenders are already hiking rates for the second time in as many weeks.

"As things stand, borrowers should expect mortgage rates to remain under upward pressure in the near term.

“Anyone approaching the end of a fixed rate should review their options sooner rather than later. Recent weeks have been a reminder of just how quickly mortgage pricing can change when market sentiment shifts."

Ways to save money on a mortgage

There is no need to panic, but now is a good time to review your mortgage and check if there are any steps you can take to protect yourself against rising rates.

Speaking to a mortgage broker is a good way to assess your options. Advisers can search the market for the best deals and outline the steps you can take now.

If you are currently on a lower rate, and can afford to do so, it may make sense to overpay your mortgage.

When you overpay your mortgage, you pay off more of the underlying debt which means that you pay less in interest over the long run.

Overpaying your mortgage now could also potentially mean that you have more equity in your home and can qualify for a lower loan to value (LTV) when it comes to remortgaging.

The lower your LTV, the cheaper your mortgage rate is.

You can also bring down monthly repayments by increasing your mortgage term. Simply put, this means you stretch out repayments over a longer period.

It can help make bills more manageable in the short term but does mean that you will pay off interest on the loan.

Product transfers or remortgage?

If you're coming to the end of your fixed rate mortgage, you can swap to a new rate with your exisiting lender which is known as a product transfer.

Lenders tend to make it pretty easy to move to a new deal and you typically won't have to jump through as many hoops as you do with a remortgage.

However, it could pay off to put in the extra effort and search the market for a better deal.

A broker can outline your options for you.

Even a small percentage difference in rates can save you a whole lot of interest.