Mortgage Rate Rollercoaster: Lenders Reverse Course Within Days

The Initial Rate Hikes

At the start of February, major lenders including Nationwide, NatWest, and Santander increased their mortgage rates following unexpected inflation data. Office for National Statistics figures showed December inflation had risen to 3.4%, up from 3.2% in November - higher than analysts had predicted.

This spike dampened market expectations for aggressive Bank of England base rate cuts in 2026, causing swap rates (which lenders use to price fixed mortgages) to rise. Lenders responded by nudging their rates upward, with some increasing prices for the second time in as many weeks.

The Dramatic U-Turn

But within days, the picture changed completely. The catalyst? A surprisingly close Bank of England vote that revealed dovish sentiment among policymakers.

While the Bank held its base rate at 3.75% on 5 February, the vote was split 5-4, with four members voting to cut rates to 3.5%. This closer-than-expected margin signalled that further rate cuts remain firmly on the table, potentially as soon as March.

More importantly, the Bank indicated that inflation is expected to fall back to the 2% target by spring 2026, leaving room for continued easing of monetary policy throughout the year.

Competition Trumps Caution

The second factor driving the reversal is fierce competition among lenders. With approximately 1.8 million fixed-rate mortgages expiring in 2026, lenders are fighting aggressively for market share.

What This Means for Borrowers

The rapid swing in mortgage rates over the past week demonstrates just how quickly the market can change. For borrowers, this creates both challenges and opportunities.

• Those who locked in rates during the brief increase may feel frustrated, but most lenders offer rate check services that allow you to switch to better deals before completion
• Borrowers approaching the end of their fixed term should act now while rates remain competitive - waiting for further falls is a gamble
• The volatility emphasizes the importance of working with a mortgage adviser who can monitor the market on your behalf

Expert Commentary

Richard from Mortgages Northern Ireland commented: "This week has been a perfect example of why borrowers need expert guidance in today's market. Rates went up, then down again within days. Those who panicked during the increases missed out on the reductions that followed almost immediately."

He added: "The key takeaway is that lenders are desperate for business right now. With over a million people needing to remortgage this year, competition is keeping rates suppressed even when economic data suggests they should be rising."

Looking Ahead

Market expectations now point to one or two further base rate cuts in 2026, potentially bringing the rate down to between 3.25% and 3.5% by year end. If this materializes, mortgage rates could fall further, with some experts predicting deals could drop below 3.5% by spring.

However, the past week has shown that the path won't be smooth. Expect continued volatility as lenders react to economic data, compete for business, and adjust to changing Bank of England signals.

For borrowers, the message is clear: when you find a good rate, secure it. The market can change in days, and waiting for the "perfect" rate could mean missing out on excellent deals that are available right now.

If you're navigating the volatile mortgage market and need expert guidance, our team at Mortgages Northern Ireland can help you find the best deal for your circumstances. We monitor rate changes daily and can help you secure competitive rates before they change again. Call us on 0330 043 0327 or visit our website for a free, no-obligation consultation.