Why Rachel Reeves’ November 26 Budget May Push UK Mortgage Rates Higher

The upcoming Budget from Chancellor Rachel Reeves on 26 November 2025 is capturing the attention of mortgage borrowers because of its potential knock-on into the UK mortgage market. With signs of rising government borrowing costs and pressure on fiscal headroom, mortgage rate-setters are already positioning for a tougher environment.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Below we unpack how and why the Budget could affect mortgage pricing, what it means in practice, and how borrowers might respond.

What moved UK mortgage pricing ahead of the Budget

Several inter-linked factors are putting upward pressure on mortgage rates, some of which are being influenced by the Budget backdrop.

• Long-dated UK government bond (gilt) yields have climbed as markets nervously assess the sustainability of the UK’s public finances.

• Lenders have started raising fixed mortgage rates on newly-launched deals, citing the economic and fiscal environment.

• The Budget announcement itself signals that fiscal rules and borrowing constraints are front and centre, which could constrain government flexibility and heighten market risk premiums.

• Higher swap rates (the underlying cost from which many fixed-mortgage products derive) can feed into retail mortgage rates. When bond yields and market risk widen, lenders pass that through.

Key numbers (as at October 2025 London):

• Inflation remains sticky at around 3.8 – 4% in the UK.

• Mortgage lenders have already increased fixed-rate offerings by up to 0.2 percentage points.

• 20- and 30-year gilt yields are at the highest levels since the late 1990s.

What the Budget might do (and why that matters)

Here’s how the upcoming Budget could influence mortgage rates.

1. Fiscal tightening and market expectations
Chancellor Reeves has pledged to keep a “tight grip” on spending in the Budget to help drive down inflation and borrowing costs. If markets judge the Budget to be insufficiently credible (for example, borrowing is higher than expected, or growth forecasts are revised down), risk premia on government debt could rise, lifting gilt yields and therefore mortgage costs.

2. Tax rises or spending cuts
With headwinds from weak growth and a possible productivity downgrade, the government may need to raise taxes or cut spending to plug holes. Tax rises can dampen consumer spending and growth (possibly positive for underlying interest rates), but if they fail to reassure markets about debt sustainability, lenders may demand higher compensation for risk — meaning mortgage rates may rise.

3. Inflation and interest-rate implications
If the Budget generates upside inflation risk (via spending or tax shifts), then the Bank of England may need to keep its policy rate higher for longer. That normally keeps fixed-mortgage pricing elevated. Conversely, if the Budget supports growth without inflation, the BoE might cut sooner. But given the current environment (sticky inflation, borrowing costs high), the risk leans towards rates staying higher.

4. Timing matters for borrowers
Because lenders price in future expectations of cost, the Budget’s content and market reaction could prompt lenders to raise fixed-deal rates ahead of the event (or shortly after) to hedge risk. Some of that appears to already be happening.

What this means for first-time buyers, remortgagers and landlords

• First-time buyers: While many are hoping for helpful measures (such as stamp duty cuts) this Budget, the broader rate environment suggests borrowing costs may not fall significantly in the near term.

• Remortgagers: If you are coming off a fixed rate this year or next, the risk is that your next deal may be higher than current market levels suggest. Locking in earlier may make sense (subject to your circumstances).

• Buy-to-let landlords: Rising mortgage rates increase finance costs and may squeeze margins. The interplay of tax regime changes, higher borrowing costs and regulatory pressure warrants caution.

If the Budget delivers a credible plan that reassures markets, there may be scope for rate relief later. But if investor confidence stays fragile, lenders are likely to keep pricing on the cautious side.

If you’d like to understand how today’s moves could affect you, speak to a qualified mortgage adviser such as Mortgage One. We can help you explore your options and timing based on your individual circumstances.

FAQs

Will the Budget necessarily push mortgage rates up?
Not necessarily. If the Budget brings credible measures that calm markets (reduced borrowing, solid growth forecasts), yields could fall and mortgage rates might moderate. But given current signs, upward risk is stronger.

Should I fix my mortgage now ahead of the Budget?
That depends on your personal situation — how long your current deal has left, your deposit size, income and attitude to risk. A fixed rate now may offer certainty, but it may cost a little more. It’s worth speaking to a qualified adviser.

Could the Budget include any measures that directly help mortgage borrowers?
Yes, it could include stamp duty cuts, Help-to-Buy style incentives, or support for first-time buyers. However, those won’t necessarily offset higher borrowing costs from market pressures.

How long will any rate increases last?
If the Budget fails to reassure markets, higher yields could persist for months, keeping mortgage rates elevated until the Bank of England feels comfortable cutting its base rate significantly.

What should landlords be watching in the Budget?
Landlords should watch for any tax changes (such as corporation tax or mortgage interest relief), amendments to landlord regulation, and what the Budget does to rental market affordability and demand — all can feed into their finance cost and yield prospects.