What are swap rates, and why do they push mortgage rates up?
Published 17 September 2026 · 5 min read · By Evren Ergin
Swap rates are the wholesale cost lenders pay to fix the interest they owe for two or five years, and they are the main number behind the price of a fixed-rate mortgage. That is why average fixed rates have risen by almost a full percentage point since March 2026 while the Bank of England's Bank Rate has not moved from 3.75% since July.
TL;DR
- •A swap rate is the fixed rate the market charges to swap a floating interest payment for a fixed one over a set term, such as two or five years.
- •Moneyfacts reported that the two-year swap rose from 3.33% in late February 2026 to 4.26% on 3 September, and above 4.70% by 15 September.
- •Over the same period the average two-year fixed mortgage went from 4.84% to 5.73%, adding about £131 a month to a £250,000 loan over 25 years.
- •Bank Rate decides tracker and variable mortgages; swap rates decide fixed ones, which is why the two can move in opposite directions.
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If you are selling, buying or remortgaging this autumn, you will have seen the same puzzle in the news. The Bank of England has held Bank Rate, yet NatWest, Santander, HSBC, Lloyds, TSB and Nationwide have all raised their fixed mortgage rates twice in September 2026. Swap rates are the missing piece.
What is a swap rate?
A swap rate is the fixed interest rate at which two parties agree to exchange a fixed payment for a floating one over an agreed period. In the UK the floating side follows SONIA, the overnight rate banks pay each other, which tracks Bank Rate closely. The two-year swap rate is effectively the market's price for what borrowing will cost, on average, over the next two years.
Why do lenders use swap rates to price fixed mortgages?
A lender that promises your buyer a fixed rate for five years still pays variable costs on much of its own funding. Swaps let it lock those costs for the same five years, so the swap rate becomes the floor of its pricing. Moneyfacts noted that in late February 2026 the lowest-priced deals from the major lenders sat only about 0.29 percentage points above the two-year swap.
What is Bank Rate, and how is it different?
Bank Rate is the interest rate the Bank of England sets, and it has been 3.75% since the Monetary Policy Committee held it on 30 July 2026. It moves tracker mortgages and standard variable rates directly. Fixed rates follow swap rates instead, and swap rates move on what markets expect Bank Rate to do in future, not on where it sits today.
Why have swap rates risen in September 2026?
Markets now expect borrowing costs to stay higher for longer than they did in the spring. Moneyfacts' Rachel Springall pointed on 7 September 2026 to renewed volatility in swap markets and to the UK 10-year gilt yield rising above 5% in a global bond sell-off, which lifts the wholesale funding costs behind fixed mortgage pricing.
How far have swap rates and mortgage rates moved this year?
Swap rates and average fixed mortgage rates, 2026 (Moneyfacts)
| Date | Two-year swap | Five-year swap | Average two-year fix | Average five-year fix |
|---|---|---|---|---|
| Late February / 1 March 2026 | 3.33% | 3.51% | 4.84% | 4.96% |
| 3 September 2026 | 4.26% | 4.36% | Not reported | Not reported |
| 15 September 2026 | Above 4.70% (swap rates overall) | Above 4.70% (swap rates overall) | 5.73% | 5.78% |
The pattern in the table is the whole story. Swap rates rose first, and lenders followed with two rounds of repricing within a fortnight.
What does a one-point rise mean in pounds?
ValuQ calculation: monthly repayments on a £250,000 repayment mortgage over 25 years
| Interest rate | Monthly repayment | What it represents |
|---|---|---|
| 3.75% | About £1,285 | Bank Rate today, for comparison only |
| 4.84% | About £1,438 | Average two-year fix, 1 March 2026 |
| 5.73% | About £1,570 | Average two-year fix, 15 September 2026 |
| 7.13% | About £1,788 | Average standard variable rate, September 2026 |
Turned the other way, a buyer who could afford about £1,438 a month in March could borrow roughly £250,000 then. At 5.73% the same monthly payment supports about £229,000. That gap of around £21,000 is the pressure you may hear about in offers and renegotiations this autumn.
Why doesn't my fixed rate change when swap rates move?
A fixed rate is fixed for its term. Swap movements change the price of new deals, not deals already running, and not formal mortgage offers already issued. They matter to you when you next choose a deal, or when your buyer is still waiting to apply.
Who is affected most by rising swap rates?
- Buyers who have agreed a purchase but not yet applied for their mortgage, because their borrowing is tested at today's prices.
- Homeowners whose fixed deal ends soon; the Bank of England has estimated around 750,000 households with fixes below 3% expire during 2026.
- Sellers whose buyer is still at the mortgage in principle stage, since a smaller loan can lead to a request to renegotiate.
- People on tracker or standard variable rates are affected by Bank Rate decisions rather than swap rates.
Will mortgage rates come down again?
Nobody can promise the direction, and ValuQ does not forecast rates. What is known is the mechanism: fixed rates tend to fall after swap rates fall, usually with a lag of days or weeks as lenders reprice. Watching swap rates tells you more about the next move in fixed mortgages than watching Bank Rate alone.
What should sellers and buyers do with this?
- If you are buying, get your full application in once your purchase is agreed, so your rate is not exposed to further repricing.
- If you are selling, ask your agent whether your buyer holds a formal offer, a submitted application or only a mortgage in principle.
- If your fix ends within six months, ask a broker about securing a new rate early; many lenders let you do this.
- Base your asking price on local sold evidence rather than the rate headlines, because buyers still pay what comparable homes sell for.
Bank Rate is the headline. Swap rates are the price tag on a fixed mortgage.
Knowing the real value of your home is what keeps a rate-driven renegotiation calm. ValuQ gives UK homeowners free, side-by-side property valuations from competing local estate agents, so you can compare the evidence before you commit to a price.
Sources
- [1]Mortgage Solutions, Higher mortgage rates 'inevitable' as swap rates rise (Moneyfacts) · 2026-09-07 · https://www.mortgagesolutions.co.uk/mortgage-news/2026/09/07/higher-mortgage-rates-inevitable-as-swap-rates-rise-moneyfacts/
- [2]IFA Magazine, Second wave of mortgage rate hikes begins before BBR decision (Moneyfacts) · 2026-09-15 · https://ifamagazine.com/second-wave-of-mortgage-rate-hikes/
- [3]Property Industry Eye, Mortgage rates surge again as major lenders reprice · 2026-09-16 · https://propertyindustryeye.com/mortgage-rates-surge-again-as-major-lenders-reprice/
- [4]Bank of England, Bank Rate held at 3.75% · 2026-07-30 · https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
Terms in this article
Plain-English definitions from the ValuQ property glossary.
Agreement in principle (AIP)
An agreement in principle is a lender's conditional indication of how much it would lend you, based on basic details and a credit check.
Fixed-rate mortgage
A fixed-rate mortgage locks your interest rate and monthly payment for a set period, commonly two or five years.
Repayment mortgage
A repayment mortgage pays interest and a slice of the loan every month, clearing the whole debt by the end of the term.
Renegotiation
Renegotiation is reopening the agreed price after the survey or searches reveal something the offer did not account for.
Base rate
The base rate is the interest rate the Bank of England sets, which flows through to mortgage pricing across the market.
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