OBR mortgage rate projections: what the forecast says for 2027 to 2029

The Office for Budget Responsibility (OBR) expects the average interest rate paid across all UK mortgages to rise from 4.1% in 2026 to 4.4% in 2027, and to settle at around 4.5% in 2028 and 2029. Those figures come from its March 2026 forecast, which was finalised before the energy price shock that has since pushed inflation back up. Here's what the projections say, what they don't, and how much weight to put on them.

Updated on 17 September 2026 with the OBR's March 2026 projections and the Bank of England's latest decision. We first published this article in November 2024.

OBR projection for 2027

4.4%

Average rate across all outstanding UK mortgages, up from 4.1% in 2026

OBR projection for 2029

4.5%

Rising slowly to around 4.6% in 2030. Source: OBR Economic and fiscal outlook, March 2026

What the OBR projects for mortgage rates, year by year

The OBR is the independent body that produces the official economic forecasts behind the government's Budget. Its latest full forecast, the Economic and fiscal outlook, was published on 3 March 2026. One of the figures it projects is the average effective interest rate on UK mortgages.

The table shows calendar-year averages, worked out from the quarterly figures in the OBR's detailed forecast tables and rounded to one decimal place. We've included the Bank Rate path the forecast assumes, because the two are closely linked.

Two things stand out. First, the average mortgage rate keeps edging up even in years when Bank Rate was expected to fall. Second, the March projections were on average 0.3 percentage points lower than the OBR's previous forecast in November 2025, because markets at the time expected lower interest rates.

Why the average rate rises even if Bank Rate falls

The OBR says around 90% of UK mortgages are on fixed rates. When a fix ends, the borrower moves to a new deal priced on today's market. Many people are still coming off deals they took out when rates were far lower, before 2022, and their new rate is higher than their old one. That slowly lifts the average across all mortgages, which is why the OBR's figure climbs gradually rather than tracking Bank Rate up and down.

The OBR's "effective" rate is not the rate you'll be quoted

This is where people often get confused. The OBR figure is an average across every outstanding mortgage in the UK: old fixes, new fixes, trackers and standard variable rates all mixed together. It is not a forecast of the rate a lender will offer you on a new two-year or five-year fix.

New-deal rates move much faster. Lenders price fixed rates largely from swap rates, which react to what markets expect interest rates to do next. So quoted rates can rise or fall within weeks, while the average across all mortgages shifts by a few tenths of a percentage point a year. For today's rates on new deals, see our current UK mortgage rates update.

What the OBR figure does tell you is the direction of travel for households as a whole: more of them paying more than they did a few years ago.

Do the projections still hold after the energy price shock?

This is the big caveat for anyone reading these numbers in autumn 2026. The OBR based its forecast on market interest rate expectations from the 10 working days to 22 January 2026. It noted that conflict in the Middle East escalated as it was finalising the report, and warned that this could have very significant effects on the economy, particularly energy markets.

A lot has changed since:

• Bank Rate. The OBR's forecast assumed markets were right that Bank Rate would fall from 3.75% to about 3.3% by late 2026. Instead, the Bank of England held at 3.75% on 17 September by a 6–3 vote, with three members wanting a rise to 4%. Markets now expect a possible rise as early as November and further increases next year, perhaps to 4.75%.
• Inflation. The OBR expected CPI inflation of 2.3% in 2026 and 2% from 2027. UK inflation was 3.1% in August, and the Bank expects it to reach around 4% early next year as higher energy costs feed through.
• Energy prices. The forecast assumed oil at around $63 a barrel in 2026. Energy prices have risen sharply since the conflict escalated.

Read our article on the latest decision, The Bank of England holds at 3.75%, but a rate rise is edging closer, for the full picture.

On that basis, the March projections for 2027 and beyond now look optimistic. If Bank Rate goes up rather than down, the average mortgage rate is likely to climb faster or higher than the table suggests. There is one point in the other direction, though. Bank of England data shows the actual average rate on outstanding mortgages was 3.97% in July 2026, a little below the OBR's path of around 4.1% for the middle of this year. The rise has been slower so far than projected.

How reliable are OBR mortgage rate forecasts?

They're useful, but they are not predictions of what will happen. The OBR does not form its own view on interest rates. It takes what financial markets expect at a point in time and builds its forecast around that, so when market expectations change, its projections change too.

You can see this in how the figures have moved. In October 2024, the OBR expected the average rate to peak at about 4.5% in 2027. By November 2025, it expected around 5% by 2029. In March 2026, the 2029 figure came back down to 4.5%. Each change followed a shift in what markets expected Bank Rate to do, and none of those forecasts allowed for this year's energy shock.

The OBR's next forecast is due on 28 October 2026, alongside the Budget. It will be the first full forecast to reflect this year's energy shock, and we'll update this page when it's published.

What this could mean for your mortgage

To put the numbers in context: on a £200,000 repayment mortgage over 25 years, the difference between 4.1% and 4.5% is about £45 a month. That's an illustration, not a quote, but it shows why small moves in rates add up.

What you can do now

If your fixed rate ends in the next six months, you can usually secure a new deal well before it ends, and in many cases switch to a cheaper one if rates improve before it starts. Our remortgage advice covers how that works.

If you're deciding how long to fix, there's no right answer that suits everyone. Our guide to how long to fix for sets out the trade-offs.

If you're buying, build some room into your budget for rates to be higher than they are today, rather than relying on any single forecast.

Quick Mortgages is a whole-of-market broker with no broker fees. We can compare deals from across the market and help you plan for rates going either way.

Speak to an adviser

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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.