Competition between lenders, as well as other factors, may lead to interest rates rising and falling throughout the year. For some homeowners, it could mean their repayments fall.
Over the summer months, interest rates fell slightly as tensions in the Middle East eased. Now, the expectation that the Bank of England (BoE) could increase the base rate led to them starting to creep up in August.
Yet, it’s impossible to know what’s around the corner.
As a mortgage often involves borrowing large sums, even a small difference to the interest rate could affect your repayments and the total cost of borrowing. Understanding whether you’d be affected if interest rates fell, or increased, could be useful.
As mortgage advisers, we could help you find a deal that suits your needs, including comparing different lenders to identify those with a competitive interest rate.
Could I benefit if interest rates fall if I have an existing mortgage deal?
If you already have a mortgage deal in place, whether or not you’d benefit from lenders cutting their interest rate will depend on the type of mortgage you have and your circumstances.
Variable- and tracker-rate mortgages
If you have a variable- or tracker-rate mortgage, the interest rate you pay can rise or fall during the mortgage term. As a result, when interest rates fall, you could benefit from lower repayments.
A tracker-rate mortgage will follow the BoE’s base rate, while a variable-rate mortgage will depend on the rate set by your lender. Keep in mind that introductory offers for new mortgage deals may be different to the rate you pay as an existing customer.
Fixed-rate mortgages
As the name suggests, the interest rate on a fixed-rate mortgage deal is fixed for a defined period, such as two or five years. This provides you with security as you’ll know how much your repayments will be each month. However, when interest rates fall, you don’t immediately benefit.
Instead, you’ll need to wait until your existing deal ends. Remember, you can usually lock in a new deal up to six months before your current one ends. Typically, if interest rates fall after you’ve locked in the deal but before the new term begins, you’ll be able to cancel it.
How will interest rates change in the remainder of 2026?
Since 2025, the BoE has gradually decreased the base interest rate as inflation eased. However, there’s no guarantee that this trend will continue.
A range of factors influence the decision to change the interest rate, including inflation, economic performance, and geopolitics. For example, if tensions escalated in the Middle East, the impact on trade could lead to inflation rising. In response to this, the BoE could raise interest rates.
It’s impossible to guarantee how interest rates might change in the future. So, it’s important to feel confident about your ability to meet mortgage repayments, particularly if the interest rate you pay could change.
Get in touch
If you’re searching for a new mortgage deal or have questions about your existing deal, please get in touch.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
