Lenders Cut Rates While Markets Predict the Base Rate Will Rise
Lenders cut fixed mortgage rates for a second week running in the week to 14 August 2026, with Santander, NatWest, Coventry, Accord and Halifax all repricing lower. In the same week the forward curve had the Bank of England base rate rising from 3.75% to 4.37% within twelve months. Set side by side those two facts look like a contradiction, and they are not. Understanding why tells you how long the cuts can last and what to do with a deal that ends this year. Mortgage One is a whole of market mortgage adviser helping borrowers secure a fixed rate while lenders cut and markets price a rise.
If your fixed deal ends before the 17 September decision and you would rather hold one of this week’s cuts than watch it go, call 01202 155992 or contact Mortgage One.
Which lenders cut mortgage rates in the week to 14 August 2026?
Santander cut by up to 25 basis points across more than 200 products, NatWest by up to 24, Coventry by up to 20, Accord by up to 18 and Halifax by up to 15 in the week ending 14 August 2026. HSBC, BM Solutions, Landbay and Molo repriced lower, with Landbay cutting buy-to-let rates by up to 35 basis points.
The cuts reached every part of the market rather than one corner of it. Santander’s lowest new rate was 4.89% for a two-year fix at 90% loan-to-value for first-time buyers, Coventry’s was 5.17% at the same band, and NatWest’s was 5.17% on a two-year buy-to-let remortgage at 75% loan-to-value with no fee. Atom Bank trimmed its Prime range by 20 basis points and Paragon refreshed its buy-to-let range with a two-year green product at 3.55%.
The momentum carried into the following week. Santander cut again across its fixed range in the week to 19 August, leaving the lowest two-year remortgage rate in the market at 4.56% and the lowest five-year at 4.65% from Principality Building Society. The running list of who has moved and by how much sits on our mortgage rate cuts page, which is refreshed each repricing wave.
What markets are predicting for the Bank of England base rate
Forward pricing derived from the Bank of England overnight index swap curve on 20 August 2026 puts the base rate at 4.09% in February 2027, 4.37% in August 2027, 4.39% in August 2028 and 4.55% in August 2031, against 3.75% today. The market is predicting a rise, with most of it priced into the next twelve months.
That path is a market price, not a Bank decision. The Monetary Policy Committee held at 3.75% on 30 July 2026 on a 6-3 vote, with three members voting for 4%, and said it stands ready to act if second-round effects from higher energy prices appear. The next decision is on 17 September. Our analysis of the 30 July rate decision covers how the vote split and what the dissenters argued.
The inflation data since then has leaned the hawks’ way. CPI inflation rose to 2.9% in July 2026 from 2.6% in June, driven by gas prices rising 14.7% over the year against a 7.2% fall a year earlier. The August figure lands on 16 September, the day before the decision, and a second upward move would harden the case for a rise.
For the full curve, the Bank’s own survey of market participants and how the two have diverged, our Bank of England base rate forecast is updated as the pricing moves. The point for this page is narrower: the curve slopes up, lender pricing slopes down, and that gap is what a borrower with a deal ending this year is trying to read.
Why can lenders cut rates while the base rate is predicted to rise?
Lenders can cut because fixed rates are priced from swap rates plus a margin, and the swap curve already contains the predicted base rate rise. What moved in August was the margin, squeezed by competition for the autumn run of maturing deals. On five-year money that margin was 0.54 points in June 2026, against more than three points in 2012.
A fixed rate is a funding cost plus whatever the lender needs to cover capital, servicing, credit risk and distribution. The funding cost is set by swap rates for the matching term, and swaps move on where the market expects the base rate to go, not on where it is. A predicted rise is therefore already in the price of every fixed deal on sale. When swaps are steady and a lender is behind on its lending targets, the only lever left is margin, and in August a string of lenders pulled that lever within days of each other. Our swap rates and lender margin chart plots both lines back to 2009 and shows how little margin is left to give.
Volume is the second driver. Summer purchase activity is seasonal, the remortgage pipeline is not, and a lender that wants its share of the deals maturing between now and Christmas has to be near the top of the sourcing tables when those borrowers start looking, which for many is six months ahead of the end date. Cutting 15 to 25 basis points buys that position. It also explains why several lenders cut remortgage and product transfer pricing in the same week they cut purchase rates.
So the contradiction dissolves. Markets predicting a higher base rate and lenders cutting fixed rates are two different numbers moving for two different reasons. The curve describes funding cost. The cuts describe competition. If the curve shifts higher, swaps move first and fixed pricing follows with a lag of roughly two to six weeks. If it holds, the margin compression can continue until a lender’s service capacity or its appetite for thinner lending runs out.
Why are average mortgage rates still higher than a month ago?
Average fixed rates rose in the month to 20 August 2026 even as best-buy rates fell, with the average two-year fix at 5.60% against 5.50% a month earlier and the average five-year at 5.63% against 5.52%. Averages cover every loan-to-value band and every lender, so a handful of best-buy cuts barely moves them.
The market has been repricing in both directions at once. Santander raised selected fixed rates by up to 0.19 percentage points and Halifax by up to 0.15 points earlier in August, before both cut again in the week to 14 August. Smaller lenders that repriced higher after the July swap spike have not all followed the large banks back down, and higher loan-to-value bands have been slower to move than the 60% and 75% tiers where competition is fiercest.
This is why asking whether mortgage rates are going up gets two honest answers. The rate a well-placed borrower can secure at 60% or 75% loan-to-value is lower than it was a month ago. The average rate across the 7,508 residential deals on sale is higher. Our UK mortgage rates chart shows the average in each loan-to-value band, and our current UK mortgage rates page compares two-year and five-year fixed pricing side by side.
If you are not sure which of those two answers applies to your loan-to-value and your lender, one whole of market review settles it, so call 01202 155992 or contact Mortgage One.
How long can a mortgage price war last against a rising curve?
A mortgage price war runs for as long as lenders will write volume at a thinner margin, which in practice means until swap rates move decisively higher or service capacity fills. With the five-year spread already near half a point, there is limited margin left to cut, so the current round is more likely to stall than to deepen.
July is the template. Lenders cut through the first week of the month, the Iran ceasefire collapsed on 8 July, swap rates rose and Nationwide, Virgin Money and Coventry repriced higher within days, with Nationwide lifting some products by up to 0.35%. The August cuts have come on steadier swaps, which is why they have lasted two weeks rather than one, but the same mechanism is waiting: a sharp move in gilts or swaps ends a price war faster than any lender’s marketing calendar.
For borrowers the practical read is that the window is real but not open-ended. A cut that lands this week can be reserved now and held with most lenders until your current deal ends, with the option to switch if a cheaper deal appears before completion. Waiting for the price war to deliver a better rate next month means betting that swaps stay calm through the 16 September inflation release and the 17 September decision. Our analysis of whether to fix your mortgage now or wait sets out that trade-off in full.
What to do if your fixed deal ends in the next six months
Reserve a rate now and keep the right to switch. Whether mortgage rates are going up or down in general matters less than whether today’s best-buy pricing beats what will be on sale at your end date. With lenders cutting into a curve that predicts a rise, a held rate costs nothing if pricing improves.
Two-year or five-year is the second call. A two-year fix prices off two-year swaps, which carry most of the predicted rise, while a five-year fix prices off a flatter part of the curve and currently sits within a few basis points of the two-year on average. Our fixed-rate mortgage guide compares the terms, and our tracker mortgage guide covers the alternative for anyone who would rather ride the base rate than lock against it.
Route matters as much as timing. A product transfer with your existing lender usually avoids a fresh affordability assessment and completes quickly, while a full remortgage opens the whole market and can win on rate or let you borrow more. Our remortgaging guide and product transfer guide weigh the two on total cost. As a whole of market mortgage broker, Mortgage One checks your lender’s retention offer against every other lender’s pricing in the same pass.
For a free initial consultation that puts this week’s cuts against the rate you are actually paying, call 01202 155992 or contact Mortgage One.
Back to Rate Forecast and Economic Drivers
The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.
FAQs
1. Why are lenders cutting mortgage rates if the base rate is going up?
Because fixed rates are priced from swap rates plus a lender margin, and the swap curve already includes the rise markets predict. August’s cuts came from margin, squeezed by competition for the autumn run of maturing deals, not from any change in the base rate outlook. The base rate itself has not moved since December 2025.
2. Are mortgage rates likely to go up again in the UK?
Market pricing says the base rate is more likely to rise than fall over the next year, and fixed rates follow swap rates that already carry that expectation. Lenders can still cut fixed rates inside that picture by trimming margin, as they did in August 2026. A sharp rise in swap rates would reverse those cuts within weeks.
3. Have mortgage rates gone up in 2026?
On average, yes. Average two-year and five-year fixed rates are higher than they were a month ago and above the lows seen in early July. Best-buy rates at lower loan-to-value bands have fallen in August, so the answer depends on whether you are looking at the market average or the deal you can actually secure.
4. Why are mortgage rates going up when the base rate has not changed?
Fixed rates are priced from swap rates, which move on where the market expects the base rate to go rather than where it is today. When expectations shifted towards a rise after the energy shock, swaps rose and fixed rates followed, even though the Bank of England has held at 3.75% throughout 2026.
5. Is it better to fix for 2 or 5 years?
It depends on how much certainty you want and what you expect to be on sale in 2028. Two-year and five-year averages are close at the moment, so five years of certainty costs little extra. A two-year fix suits borrowers who expect to reprice into a lower market, a five-year fix suits those who would rather stop watching the curve.
6. Will mortgage rates ever be 3% again?
Not on current market pricing. The forward curve has the base rate above 4% through the end of the decade, and fixed rates sit above the swap rate for the matching term. A return to 3% fixed rates would need a sustained fall in inflation expectations that the market is not pricing today.
7. Should I fix my mortgage now or wait for further cuts?
If your deal ends within six months, reserving a rate now costs nothing if pricing improves, because most lenders let you switch to a cheaper deal before completion. Waiting only pays if the cuts continue, and the market-implied path for the base rate points the other way.
8. Can a mortgage broker get a rate that is not on the best-buy tables?
Often, yes. Some lenders price broker-only products, others offer retention deals that never appear on comparison sites, and a broker can place a case with a lender whose criteria suit your income or property where a high street lender would decline. Mortgage One checks all of those routes in one review.