Bank of England Holds at 3.75% — But Mortgages Are Getting More Expensive
On 30 July 2026, the Bank of England's Monetary Policy Committee voted six to three to hold the base rate at 3.75%. For buyers and homeowners who had been watching that decision as a signal to act, the outcome looked simple: rates unchanged, market steady.
It wasn't. Within days, Nationwide, HSBC, TSB, and several other major lenders raised their fixed-rate mortgage products. Some withdrew competitive deals entirely. The base rate stayed flat. The cost of borrowing went up.
Understanding why that happened, and what it means for anyone buying a new build in London right now, requires looking past the headline number.
The Rate That Actually Moves Your Mortgage
Fixed-rate mortgages are not priced off the Bank of England base rate. They are priced off swap rates: the wholesale rates at which lenders lock in funding for fixed-term products on financial markets. When swap rates rise, lenders pass that cost on to borrowers through higher fixed-rate deals, regardless of what the MPC decides.
Since mid-July, SONIA (Sterling Overnight Index Average) swap rates have trended upward across two, five, and ten-year terms. Markets are no longer pricing in rapid cuts. The working assumption is now that rates stay higher for longer, with some probability of a further increase before the end of 2026.
That shift in expectations, not the MPC vote itself, is what has driven lenders to reprice.
Why Expectations Changed
Two factors have pushed market expectations in the wrong direction for borrowers.
First, oil. Geopolitical tensions in the Middle East have pushed crude toward $100 a barrel. Higher energy prices feed directly into UK inflation through fuel, transport, and manufacturing costs. Inflation that was falling toward the 2% target, reaching 2.6% in June 2026, is now at risk of reversing.
Second, the MPC split itself. A six-three vote to hold is not a strong signal of confidence in the current rate level. Three committee members voted for an immediate increase to 4%. When markets see a vote that close, they price in a higher probability of a hike at the next meeting. That meeting is scheduled for 17 September 2026.
Both factors have moved swap rates up, and mortgage pricing with them.
What the Numbers Look Like Now
| Product Type | Rate (April Peak) | Rate (Late July) | Direction (Aug) |
|---|---|---|---|
| 2-year fix (75% LTV) | ~5.0% | ~4.6% | Rising |
| 5-year fix (75% LTV) | ~4.8% | ~4.4% | Rising |
| BoE Base Rate | 3.75% | 3.75% | Held |
| Next MPC Decision | 17 September 2026 | ||
What This Means If You Are Buying Now
The window of the lowest rates seen in summer 2026 may already have closed. Lenders can change pricing within 24 to 48 hours, and several did so in the first days of August. Buyers who were monitoring the market and waiting for a clear signal got caught by a repricing they did not expect.
For buyers considering new builds in London, the practical question is this: if you have a mortgage offer in principle, check its expiry date. Most offers are valid for three to six months, but if you received it when rates were lower, the deal you were quoted may no longer be available at renewal.
If your current fix ends within the next six months, starting the review process now gives you access to today's rates before any further moves at the September meeting. Most brokers allow you to lock in a rate up to six months before your deal expires.
The Case for Off-Plan and Alternative Routes
In an environment where mortgage costs are moving unpredictably, buyers looking at off-plan property have a specific advantage: exchange typically happens at a fixed price agreed today, with completion, and therefore the mortgage draw-down, potentially 12 to 24 months away. That gives buyers time for the rate environment to shift while securing today's purchase price.
For first-time buyers who find current rates are pushing monthly payments beyond what is comfortable, shared ownership homes offer a lower mortgage balance for the same property. The mortgage is taken only on the purchased share, not the full value, which reduces the direct exposure to rate movements.
Buyers looking at areas where purchase prices are more manageable, such as new builds in Greenwich or other well-connected outer boroughs, often find that lower acquisition costs translate into monthly payments that remain workable even at current rates.
Practical Takeaways for Buyers
- The base rate is not your mortgage rate. Swap rates drive fixed products independently. The BoE can hold at 3.75% while your deal gets more expensive the same week.
- Act before 17 September. Three MPC members already voted for a hike last week. If they get their way at the next meeting, fixed rates will move again quickly.
- Lock in an Agreement in Principle now if you are six to twelve months from buying. Most allow you to switch to a better rate if one becomes available before completion.
- Check your existing offer. If you received it in May or June when rates were lower, verify whether it is still valid. Some products were withdrawn entirely in the July repricing.
The Final Takeaway
The Bank of England held rates steady. The mortgage market did not. That gap between the official rate and what lenders actually charge is the most important thing buyers need to understand right now. Swap rates are the real signal to watch, and they have been moving in the wrong direction for three weeks.
For buyers of London flats and new build homes, the September 17 decision is the next hard deadline. The deals available today are almost certainly better than what will be offered if the MPC votes to raise. That is not a guarantee, but it is the direction the market is currently pricing in.
