Swap rate volatility fuels divergent pricing strategies across major high street lenders
Borrowers are again facing uncertainty over mortgage costs, with lenders adjusting fixed rates in response to shifting expectations for the Bank of England (BoE) base rate and swap markets, according to analysis from Moneyfactscompare.co.uk.
Over the past fortnight, major high street lenders including Barclays, HSBC, Lloyds Bank, NatWest and Santander have reduced selected fixed-rate products, aligning pricing with recent swap rate movements. Whether these reductions continue is unclear, with market expectations still pointing to interest rates remaining elevated for longer.
Moneyfacts data shows that average pricing across two-, five- and 10‑year fixes has risen over the past year. At the start of April, the typical 10‑year fixed rate moved above 6% for the first time since July 2024. The average two‑year fix reached its highest level since July 2024, while the five‑year equivalent climbed to a peak last seen in November 2023.
Although the Bank of England cut the base rate to 3.75% in December 2025, the average standard variable rate (SVR) has been slower to adjust. Since the cut, the average SVR has fallen by 0.14 percentage points, from 7.27% to 7.13%. Over the past year, the base rate has dropped by 0.75 percentage points, but SVRs have decreased by only 0.47 percentage points.
“Borrowers have been left in limbo as it is difficult to know whether they should rush to lock into a fixed deal or wait and see if lenders make more sizeable cuts.” said Rachel Springall, finance expert at Moneyfactscompare.co.uk.
“Unfortunately, the outlook on interest rates remains uncertain, so mortgage holders coming off a cheap fixed rate will have to cover higher repayments this year, which will be incredibly frustrating. It is still worth moving off an expensive revert rate, as borrowers could save almost £2,500 a year moving onto a fixed rate deal.”
Moneyfacts’ analysis, based on a £250,000 repayment mortgage over 25 years, shows that a borrower on an SVR of 7.13% would pay around £1,787 per month. On a two‑year fixed rate at 5.81%, the monthly payment falls to about £1,581, a difference of £206, or £2,472 over a year.
“The Bank of England refuses to rush any decisions, and with fears of a recession already creeping in, it looks like stagflation has thrown out any plans for cuts this year,” Springall (pictured right)said. “Economists expect the BoE base rate to hold in the short-term, and it’s looking increasingly unlikely we will see a cut until 2027.
“However, borrowers will hope that the mortgage mayhem experienced over recent weeks will calm, but repricing could go both ways amid swap rate moves. Mortgage rate hikes have been driven by the conflict in the Middle East, where the disruption of supply chains has created muddied waters for the future path of inflation and interest rate setting.”
Springall drew parallels with the volatility seen in summer 2023 and in the aftermath of the 2022 mini‑Budget, while noting that the underlying causes differ.
“Increasing pressures on households have the potential to echo the shocks felt by the UK during the summer of 2023, so the biggest concern for consumers will be how long they need to endure it, particularly for those looking to buy a home or remortgage, as mortgage rates have risen significantly in a short space of time,” she said.
“The Moneyfacts Average Mortgage Rate rose by 0.82% month-on-month, the biggest monthly rise since July 2023 of 0.83%. While the spikes in rates look similar on the surface to the shocks felt in the summer of 2023, and not forgetting the mini-Budget in 2022, they have very different driving forces.”
For lenders, swap pricing and Monetary Policy Committee (MPC) decisions remain central to product strategy. Springall noted that at the end of February, before the latest unrest in the Middle East, the lowest two‑year fixed mortgages from leading high street banks sat around 0.30 percentage points above the two‑year swap rate of 3.33%, and there was a broader range of sub‑4% fixed deals on offer.
As of 27 February 2026, Moneyfacts recorded a two‑year swap rate of 3.33% and a five‑year swap of 3.51%. The sharpest two‑year fixed rates available directly to consumers (excluding products linked to current accounts) were: 3.51% at Santander, 3.61% at HSBC, 3.62% at NatWest, 3.66% at Lloyds Bank and 3.70% at Barclays. The average of these low rates, at 3.62%, stood 0.29 percentage points above the two‑year swap.
By 24 April 2026, the lowest two‑year fixed rates from the same banks had moved higher: 4.55% at Lloyds Bank; 4.60% at Barclays; 4.65% at HSBC and NatWest; and 4.70% at Santander. The average of these headline rates was 4.63%, about 0.33 percentage points above a two‑year swap rate of around 4.30%.
“Base rate tracker mortgages currently look attractive but could be a gamble if interest rates rise this year, so choosing a deal with no early repayment charge would be wise,” Springall said.
“Lenders will be looking to reprice to catch up to higher swap rates over the coming days, but also to compete for new business, it’s all in the margins. Until the market sees more stability, there is very little scope for lenders to drop rates substantially due to the prolonged unrest in the Middle East. Any borrower concerned about securing a mortgage would be wise to seek advice from a broker to navigate the mortgage maze.”
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