Will Mortgage Rates Fall in 2027? What It Means for You

Fri 23 Oct 2026

If you are buying a home, remortgaging or running a buy-to-let property, the cost of borrowing matters a lot. Recent news suggests that mortgage rates may not get much cheaper any time soon. Here is what is happening, why it is happening and what it could mean for you.

HSBC has raised its mortgage rates

HSBC has announced rate increases across its residential and buy-to-let mortgage ranges. The changes came shortly after several big lenders had cut their rates, which had made many borrowers feel more hopeful.

When a large lender like HSBC moves its prices up, it is often a sign that other lenders may follow. It also shows that there is still a lot of uncertainty about where borrowing costs are heading.

Why are mortgage rates going up?

You might expect mortgage rates to follow the Bank of England base rate, which has been held at 3.75%. In fact, fixed-rate mortgages are more closely linked to something called swap rates.

Swap rates are what lenders pay to fix the cost of their own borrowing, usually over two or five years. Reports suggest these costs have risen by around one percentage point over the past year. When it costs lenders more to borrow, they pass some of that cost on to you.

Energy prices are also playing a big part. Higher oil, gas and fuel prices push up inflation, which is the rate at which everyday prices rise. Inflation is back above 3%, and the Bank of England has said it could go above 4% early next year. If inflation stays high, interest rates are less likely to fall.

What could happen in 2027?

Experts in the mortgage market believe rates are likely to stay around where they are now during 2027. There is also a risk they could edge higher rather than lower.

The biggest shock for many people may come from the deal they are leaving behind. Lots of homeowners fixed their mortgage in 2021 or early 2022, when some rates were around 1.5%. When those deals end, monthly payments could rise by a noticeable amount.

That said, energy costs are the big unknown. If they fall and stay low, the outlook could improve faster than expected, and lenders can change their prices within days.

Two-year or five-year fix?

Usually, a two-year fixed rate is cheaper than a five-year fix. Right now, the gap between them has almost closed. In some cases, longer fixes are even cheaper.

This makes the choice less about price and more about what suits your plans. Here is a simple comparison:

	Two-year fix	Five-year fix
How long your payments stay the same	2 years	5 years
Payment certainty	Shorter	Longer
Flexibility to change deal	More	Less
Early repayment charges	Usually lower and end sooner	Can be higher and last longer
Best suited to	People who may move or refinance soon	People who want to budget for the long term
Main risk	Rates may be higher when you need a new deal	You could be tied in if your plans change

A shorter fix only tends to pay off if rates fall a lot over the next two years. Many experts do not expect that to happen. A longer fix gives you more peace of mind, but it can be harder to get out of.

Do not forget early repayment charges

An early repayment charge is a fee you may have to pay if you leave your mortgage deal before it ends. These fees can be larger on longer deals.

If you think you might move house, borrow more money or see a big change in your income, think carefully before choosing a long fix. Check whether your mortgage is portable, which means you can take it with you to a new home. You can read more about how fixed and variable deals work in this guide to mortgage interest rate options from MoneyHelper.

What this means for landlords

Buy-to-let landlords are feeling the same pressure as homeowners. Higher rates can squeeze rental profits, especially for landlords whose fixed deals are about to end. Many are now looking at refinancing their buy-to-let mortgages early, so they can plan ahead and avoid a sudden jump in costs.

Plan ahead and get the right support

The mortgage market can change quickly, so it is a good idea to start looking at your options several months before your current deal ends. Using a mortgage calculator can help you see how different rates might change your monthly payments.

Every borrower's situation is different. Speaking to an adviser can help you weigh up payment certainty against flexibility. Our team at Williams & Donovan can put you in touch with expert mortgage advice to help you find a deal that fits your plans, whether you are buying, moving or remortgaging.

Your home may be repossessed if you do not keep up repayments on your mortgage.