What's happening to UK interest rates and what does it mean for mortgages?

Just under a third of households have a mortgage, according to the government's English Housing Survey, external.

About 500,000 homeowners have a mortgage that "tracks" the Bank of England's rate.

Any rise in the Bank rate means an increase in the monthly repayments on their outstanding loan. For a typical loan, the cost would go up by about £31 a month if the Bank raises the base rate by 0.25 percentage points, but it depends considerably on the size of people's loans.

An additional 500,000 homeowners on standard variable rates (SVRs) would wait to see if their lender chose to pass on any Bank rate rise. Typically, this would mean a £14 increase per month in repayments for every 0.25 percentage points rates rise.

But the vast majority of mortgage customers - some 87% - have fixed-rate deals. While their monthly payments aren't immediately affected by a rate change, their future deals are.

Most lenders have already priced in a rise in the Bank rate in November, so this is already reflected in the rates being offered.

As of 3 November, the average two-year fixed residential mortgage rate was at 5.97%, while the average five-year rate stood at 5.99%, according to financial information service Moneyfacts.

The average two-year tracker rate was 4.67%.

About 800,000 fixed-rate mortgages with an interest rate of 3% or below are expected to expire every year, on average, until the end of 2027. Borrowing costs for customers coming off those deals are likely to rise sharply.

In recent years, the UK has had one of the highest interest rates in the G7 - the group representing the world's seven largest so-called "advanced" economies.

In June 2024, the European Central Bank (ECB) started cutting the main interest rate for the eurozone from an all-time high of 4%, falling to 2% in June 2025.

However, in June 2026, the ECB raised rates to 2.25% as it reacted to the Iran war, before raising them again to 2.5% in September.

The US central bank - the Federal Reserve - raised rates for the first time in three years at its September meeting, the third under the new chair Kevin Warsh.

It meant rates rose to 3.75%-4% from 3.5%-3.75%, following three cuts since September 2025.

US President Donald Trump had repeatedly attacked the previous Fed chair Jerome Powell for not cutting rates.

Warsh said the rise was because "inflation is too high and has been for too long", adding that it was a "sober" and "responsible decision".

After the announcement, Trump expressed support for Warsh but said the Fed board, which votes on rate decisions, was "hostile".