Swap rates explained: what they are and why they move mortgage rates
Swap rates are the wholesale interest rates banks pay to lock in a fixed rate for a set number of years. Lenders use them as the starting point for pricing fixed-rate mortgages, so when swap rates rise, fixed mortgage rates usually follow within days. This guide explains what swap rates are, why they move, and what the latest rises mean for your mortgage.
The explainer sections below are general. The "latest" section is dated and reflects the market on 17 September 2026.
What are swap rates?
A swap rate is the fixed interest rate one party agrees to pay in exchange for receiving a floating rate for a set period. In the UK, the floating side is based on SONIA, the Sterling Overnight Index Average, which reflects the average rate banks and other financial institutions pay to borrow sterling overnight. SONIA is administered by the Bank of England and tracks Bank Rate closely.
So a 2-year SONIA swap rate is, in effect, the market's price for swapping two years of unknown floating rates for one fixed rate today. It reflects where traders expect Bank Rate to be over those two years, plus a little extra for uncertainty.
2-year swap rate
Prices 2-year fixes
The market's view of interest rates over the next two years. Lenders use it to price 2-year fixed mortgages.
5-year swap rate
Prices 5-year fixes
The market's view over five years. Lenders use it to price 5-year fixed mortgages.
How swap rates set fixed mortgage rates
When a lender offers you a 5-year fix, it takes on a risk: its own funding costs could rise while your rate stays the same. Many lenders manage that risk with interest rate swaps, which is why fixed mortgage pricing tends to follow the swap rate for the matching term.
From interest rate expectations to your fixed rate
How a change in the market feeds through to fixed mortgage pricing
Why is there a margin above swap rates?
You will never be offered a mortgage at the swap rate. On top of it, lenders add a margin to cover the cost of running the loan, the risk that borrowers fall behind, the capital regulators require them to hold, and profit. Margins are usually higher at higher loan-to-value, because a small deposit means more risk for the lender.
Margins also shift with competition. When lenders want business, they can absorb some of a swap rise for a while. When they are busy or cautious, they pass rises on quickly.
Swap rates vs Bank Rate: what's the difference?
Bank Rate is set by the Bank of England eight times a year. Swap rates are set by the market continuously during trading hours, based on where people think Bank Rate is heading.
| Bank Rate | Swap rates | |
|---|---|---|
| Who sets it | The Bank of England's Monetary Policy Committee | Financial markets, through trading |
| How often it changes | Up to eight scheduled decisions a year | Constantly, during market hours |
| What it reflects | Today's policy rate | Expected rates over the next 2, 5 or 10 years |
| Mortgages it mainly affects | Trackers, and often SVRs and discounted variable rates | New fixed-rate deals |
This is why fixed rates can rise while Bank Rate stays put, and why they sometimes fall before the Bank cuts. The market moves first.
Why are swap rates increasing? What makes them rise or fall
Swap rates move whenever the market changes its mind about future interest rates. These are the main drivers.
- Inflation dataHigher-than-expected inflation makes rate rises more likely, so swap rates tend to jump on the day figures are published.
- Bank of England signalsThe vote split, the Bank's forecasts and its language about future risks all shift expectations.
- The gilt marketGovernment borrowing costs and swap rates tend to move together. Worries about public finances can push both up.
- Global ratesUS rate decisions and bond yields spill into UK markets, as the Federal Reserve's rise on 16 September 2026 showed.
They fall for the opposite reasons: softer inflation, a Bank of England that sounds ready to cut, calmer bond markets, or falling rates abroad. A sudden swap rates surge can reverse just as quickly if the news changes.
The latest picture: swap rates in September 2026
This section is dated 17 September 2026. Markets move daily, so check the current position before making decisions.
Bank Rate
3.75%
Held on 17 September by a 6–3 vote. Three members wanted 4%
Swap rates
Above 4.70%
Moneyfacts, 15 September. It did not say which term
Average 2-year fix
5.73%
Moneyfacts, 15 September, up from 4.84% at the start of March
Average 5-year fix
5.78%
Moneyfacts, 15 September, up from 5.66% in early August
UK swap rates have climbed sharply since late winter. Energy prices linked to the conflict in the Middle East pushed UK inflation to 3.1% in August, and the Bank of England expects it to reach around 4% early next year. Markets have moved from expecting rate cuts to pricing in possible rises.
Moneyfacts reported that swap rates had risen above 4.70% by mid-September, prompting several of the biggest lenders to raise selected fixed rates for the second time that month. It calculated that the jump in the average 2-year fix since March adds about £131 a month to a £250,000 mortgage over 25 years.
On 17 September the Bank held Bank Rate at 3.75% but warned the risks to inflation are tilted upwards. Afterwards, markets were pricing in a possible rise at the next decision on 5 November. Gilt yields fell back on the day, with the 10-year yield ending around 5.2%, helped by the Bank's decision to stop selling long-dated gilts. A day earlier, the US Federal Reserve had raised its rate to 3.75–4.00%. We cover the decision in detail in our Bank of England rate decision article, and the latest averages in current UK mortgage rates.
For a longer view of where rates could go, see the OBR's mortgage rate projections. No forecast is certain: if energy prices ease, expectations and swap rates could fall back.
What rising swap rates mean for borrowers
The key point is speed. Lenders can withdraw and reprice fixed deals within days, sometimes at very short notice. By the time a rise shows up in the headlines, the best deals may already have gone.
Your fix ends within six months
Consider securing a deal early
Many lenders let you secure a new rate several months before your current deal ends. If rates then fall before it starts, you can often switch to a cheaper option. Compare a rate switch with your current lender against a remortgage to the wider market.
You're choosing between a fix and a tracker
Trackers follow Bank Rate, not swaps
A tracker can start lower when swap rates are high, but your payments rise if Bank Rate goes up. A fix costs more now but gives certainty. Some trackers have no early repayment charges, which keeps options open.
You're deciding how long to fix
Compare 2-year and 5-year swaps
When 5-year swaps sit close to or above 2-year swaps, longer fixes are priced similarly to shorter ones. Our guide on how long to fix your mortgage sets out the trade-offs.
Where can I see UK swap rates?
Swap rates are not published in one simple table for consumers, but you can follow them in a few places.
Where to check swap rates
- Bank of England yield curves: the Bank publishes daily estimated SONIA (OIS) and gilt yield curves, usually by noon the next working day.
- Financial data providers: market data services and financial news sites quote live SONIA swap rates by term.
- Mortgage market commentary: Moneyfacts and trade press often report swap movements when lenders reprice.
Bear in mind that each lender hedges differently and at different times, so the swap rate on any given day will not tell you exactly what a mortgage will cost.
Swap rates FAQs
What is a mortgage swap?
Usually people mean the interest rate swap that lenders use to fund fixed-rate mortgages. The lender pays a fixed rate and receives a floating rate linked to SONIA, which protects it if rates change during your fix. You never deal with the swap yourself. Some people also use "mortgage swap" to mean switching to a new deal, which is a rate switch or remortgage.
What are mortgage swap rates?
They are the SONIA swap rates for the term of a fixed mortgage, mainly 2-year and 5-year. Lenders add a margin on top to set the rates you see.
Do swap rates affect my existing fixed rate?
No. Your rate is fixed until the deal ends. Swap rates matter when you look for your next deal or if you're on a tracker considering a fix.
Why are fixed rates going up when Bank Rate hasn't changed?
Because fixed rates follow swap rates, which move on what markets expect Bank Rate to do next. In September 2026 markets began pricing possible rises, so swaps and fixed rates rose while Bank Rate stayed at 3.75%.
Will swap rates fall again?
They could, if inflation eases or the Bank of England signals rises are less likely. Nobody can predict it reliably, so it's sensible to plan around your budget rather than wait for a particular rate.
How we can help
Swap rate moves can change the market quickly. If your deal ends soon or you're buying, it helps to have someone watching lender pricing and able to secure a rate before it's withdrawn.
Quick Mortgages is a whole-of-market broker, not tied to any lender, working with a panel of 110+ lenders. Our advice has no broker fees, and we help borrowers across the UK from our Birmingham office.
Sources
- Moneyfacts, via The Intermediary, "Major lenders hike rates for a second time this month ahead of BBR decision", 15 September 2026: swap rates above 4.70% (term not stated); average 2-year fix 4.84% in March to 5.73%; £131 a month on £250,000
- Moneyfacts Compare, Bank of England base rate news, 17 September 2026: average 2-year fix 5.63% to 5.73% and 5-year fix 5.66% to 5.78%, early August to mid-September
- Bank of England, Monetary Policy Summary, 17 September 2026
- CNBC, "Bank of England defies Fed's rate-hike lead, leaving rates unchanged", 17 September 2026: 10-year gilt yield around 5.2% after the decision
- Bank of England, SONIA interest rate benchmark and yield curve statistics
- Office for National Statistics, Consumer price inflation, August 2026
Correct on 17 September 2026 and may change.
Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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