Gilt Yield Rally Could Ease Pressure on Fixed Mortgage Rates

The Bank of England's recent announcement has sparked questions about what this means for mortgage rates. While the bank rate remains at 3.75%, the real change is in the bank's bond-selling program.

Nicholas Mendes, mortgage technical manager at John Charcol, notes that fixed-rate pricing is not directly affected by the Bank Rate. Instead, it's influenced by swap rates, which have already been repriced upward in anticipation of a possible hike.

The bank's decision to stop actively selling long-dated gilts and let its remaining holdings run down to zero by September 2034 has caused a rally in long-end gilt yields. This could lead to lower swap rates and, subsequently, some relief for fixed-rate mortgage pricing, particularly for five-year and longer terms.

However, it's essential to remember that one day's market movement is not a trend, and the bank has emphasized that this change is technical rather than indicative of future Bank Rate decisions. Brokers advising clients on remortgage timing should closely monitor swap pricing over the next fortnight rather than expecting falling rates.