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Original poster

Mortgages- so you know

36 replies

Tempname1234567 · 20/12/2025 16:51

Friendly reminder than unless you’re on a variable rate tied to BBR mortgage rates have nothing to do with the Bank of England base rate.

the rate reducing isn’t the magic bullet so don’t think you can game the market. You should do what’s right for you right now.

posting because I see a lot of misinformation spread on social media right now on the base rate being the lowest in X years

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Tacali · 25/12/2025 19:21

Do you think mortgage rates will drop near march or are you saying they will be near enough the same as they are just now?
Only asking as iut 2 year fixed is up in march

Any advice greatful. Thanks 😊

Original poster
Tempname1234567 · 20/12/2025 19:25

MathsFiend · 20/12/2025 19:23

I'm really not sure what you are arguing about. I only pointed out that some banks use base rate swaps rather than SONIA swaps.

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no one is arguing but swaps aren’t linked to the base rate. So calling them base rate swaps makes it seems like base rate goes down, fixed mortgages rates go down but that’s not how it works.

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MathsFiend · 20/12/2025 19:23

Tempname1234567 · 20/12/2025 19:16

Yes but that’s not the same as mortgage fixed rates being tied to the base rate. I covered that when I said swaps are influenced by various economic factors, such as inflation which in turn will impact how many BBR cuts there might be, as well as any volatility in the domestic and foreign markets. But I think the narrative in the media that the BR comes down ergo my mortgage will be cheaper on renewal, creates a bit of a false understanding about how these things work

many banks are entirely retail deposit funded meaning higher cost of funds and as a result higher rates

interest transfer over a longer period yes because it’s the fixed period swap

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I'm really not sure what you are arguing about. I only pointed out that some banks use base rate swaps rather than SONIA swaps.

Original poster
Tempname1234567 · 20/12/2025 19:16

MathsFiend · 20/12/2025 19:10

I'm aware of how funding costs work in a bank, and that the true costs are based on a mixture of retail and wholesale deposits. For some banks, the interest rate transfer price reflects base rate swaps not SONIA swaps. So market expectations for future movements in base are reflected in the swap rate.

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Yes but that’s not the same as mortgage fixed rates being tied to the base rate. I covered that when I said swaps are influenced by various economic factors, such as inflation which in turn will impact how many BBR cuts there might be, as well as any volatility in the domestic and foreign markets. But I think the narrative in the media that the BR comes down ergo my mortgage will be cheaper on renewal, creates a bit of a false understanding about how these things work

many banks are entirely retail deposit funded meaning higher cost of funds and as a result higher rates

interest transfer over a longer period yes because it’s the fixed period swap

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MathsFiend · 20/12/2025 19:10

Tempname1234567 · 20/12/2025 18:59

Swaps aren’t tied to the base rate.

youve misunderstood cost of funds. Banks make money is numerous ways, money market, lending to other financial services institutions and some are entirely self funded which is being funded by deposits, most banks use deposits to fund lending though. So that’s what the cost of funds means, how much the bank pays to the retail customer on deposits.

mortgages aren’t price on Sonia, working out a margin on a tracker might be, but fixed mortgages aren’t priced on Sonia, they are priced on swap rates, not the base rate. Swap rates are independent from the base rate

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I'm aware of how funding costs work in a bank, and that the true costs are based on a mixture of retail and wholesale deposits. For some banks, the interest rate transfer price reflects base rate swaps not SONIA swaps. So market expectations for future movements in base are reflected in the swap rate.

Gallowayan · 20/12/2025 19:04

LighthouseLED · 20/12/2025 16:56

Never underestimate the ignorance of the general public

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You have missunderstood the OP. People in glass houses....😂

Original poster
Tempname1234567 · 20/12/2025 18:59

MathsFiend · 20/12/2025 18:39

Not all banks use SONIA for mortgage funding costs, some are based on swaps tied to base rate rather than SONIA.

Swaps aren’t tied to the base rate.

youve misunderstood cost of funds. Banks make money is numerous ways, money market, lending to other financial services institutions and some are entirely self funded which is being funded by deposits, most banks use deposits to fund lending though. So that’s what the cost of funds means, how much the bank pays to the retail customer on deposits.

mortgages aren’t price on Sonia, working out a margin on a tracker might be, but fixed mortgages aren’t priced on Sonia, they are priced on swap rates, not the base rate. Swap rates are independent from the base rate

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MathsFiend · 20/12/2025 18:39

Not all banks use SONIA for mortgage funding costs, some are based on swaps tied to base rate rather than SONIA.

Original poster
Tempname1234567 · 20/12/2025 18:32

Barrenfieldoffucks · 20/12/2025 18:28

They also say that fixed rates tend to be influenced by, so I can see how many people would think that.

Exactly I can see why people would think it, but it’s a misnomer. Hence my post

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Barrenfieldoffucks · 20/12/2025 18:28

They also say that fixed rates tend to be influenced by, so I can see how many people would think that.

Original poster
Tempname1234567 · 20/12/2025 17:58

This is a nice little explanation as the google AI summary was wildly inaccurate

www.dynamo.co.uk/blog/up-or-down-how-do-lenders-set-their-interest-rates/

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Original poster
Tempname1234567 · 20/12/2025 17:56

Barrenfieldoffucks · 20/12/2025 17:54

Hell, even mortgage provider is confused.

They are citing a tracker rate. A tracker is a variable mortgage linked to an index, that index can be but isn’t always the Bank of England base rate, often most lenders will adjust their svr to follow the changes in base rate.

as you’re googling, google how fix rates are set

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Barrenfieldoffucks · 20/12/2025 17:54

Hell, even mortgage provider is confused.

Mortgages- so you know
Original poster
Tempname1234567 · 20/12/2025 17:48

Onetimeusername1 · 20/12/2025 17:38

So why do savings rates go down as soon as the BOE base rates go down. Taking with both hands?

Because on Sonia rn mirrors BBR but they aren’t the same but they can divorce, on Sonia is a smidge below BR

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Onetimeusername1 · 20/12/2025 17:38

So why do savings rates go down as soon as the BOE base rates go down. Taking with both hands?

Original poster
Tempname1234567 · 20/12/2025 17:27

edwinbear · 20/12/2025 17:25

Fixed mortgage rates are based on swap rates, not SONIA.

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Yes! Which is exactly what I said! Hence why the BR doesn’t influence mortgages. Why are you correcting me to say the exact thing is said? Weird

the cost of funds is based on ON Sonia which influences the margin needing to be made on the mortgage

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Original poster
Tempname1234567 · 20/12/2025 17:25

bleakmidwintering · 20/12/2025 16:57

Obviously!

Apparently not

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edwinbear · 20/12/2025 17:25

Tempname1234567 · 20/12/2025 17:07

No, the banks cost of funds is based on overnight Sonia. At the moment there is a mirroring BUT they can divorce.

youre mistaken, fix rates are priced on swap rates which will factor in a whole host of economic factors, swaps rose after the br was cut, so it doesn’t always go down

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Fixed mortgage rates are based on swap rates, not SONIA.

Original poster
Tempname1234567 · 20/12/2025 17:22

Tempname1234567 · 20/12/2025 17:20

Not really no

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The wider economic factors that might lead to a rate cut may influence swap rates in downwards or vice versa but, swaps fell hugely with news of trump tariffs not a base rate reduction then was there.

it is a big misnomer that they are related/ move in tandem

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Original poster
Tempname1234567 · 20/12/2025 17:20

Mayflower282 · 20/12/2025 17:18

Not tied to it, but often influenced by it.

Not really no

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Original poster
Tempname1234567 · 20/12/2025 17:20

RichardMarxisinnocent · 20/12/2025 17:13

Could you please explain what overnight Sonia and swap rates are please?

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On Sonia is the overnight interest rate that banks lend to other banks.

Swap rates are the same basically but forward looking, 1 yr, 2 yr etc

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Mayflower282 · 20/12/2025 17:18

Not tied to it, but often influenced by it.

Original poster
Tempname1234567 · 20/12/2025 17:17

bleakmidwintering · 20/12/2025 17:14

@Tempname1234567yes I’ve had a mortgage for a lot of years!

But you don’t price them or set the rates on them I do.

ive also had hair for a lot of years, don’t know anything about how to cut it.

fixed rate mortgages are not priced on the base rate

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bleakmidwintering · 20/12/2025 17:14

@Tempname1234567yes I’ve had a mortgage for a lot of years!

RichardMarxisinnocent · 20/12/2025 17:13

Tempname1234567 · 20/12/2025 17:07

No, the banks cost of funds is based on overnight Sonia. At the moment there is a mirroring BUT they can divorce.

youre mistaken, fix rates are priced on swap rates which will factor in a whole host of economic factors, swaps rose after the br was cut, so it doesn’t always go down

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Could you please explain what overnight Sonia and swap rates are please?