𝗪𝗵𝘆 𝗮𝗿𝗲 𝗺𝗼𝗿𝘁𝗴𝗮𝗴𝗲 𝗿𝗮𝘁𝗲𝘀 𝗿𝗶𝘀𝗶𝗻𝗴 𝗶𝗳 𝘁𝗵𝗲 𝗕𝗮𝗻𝗸 𝗼𝗳 𝗘𝗻𝗴𝗹𝗮𝗻𝗱 𝗯𝗮𝘀𝗲 𝗿𝗮𝘁𝗲 𝗵𝗮𝘀𝗻’𝘁 𝗺𝗼𝘃𝗲𝗱?

Because your mortgage is not really priced off the base rate.

It’s priced off: 

• SONIA (the overnight rate banks lend to each other at), and

𝗦𝗢𝗡𝗜𝗔 𝘀𝘄𝗮𝗽 𝗿𝗮𝘁𝗲𝘀 (what the market thinks SONIA will average over 2, 5, 10 years), plus what 𝗯𝗼𝗻𝗱 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 and 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 can earn elsewhere.

𝗦𝗢𝗡𝗜𝗔 𝗶𝘀𝗻’𝘁 𝗮𝗻 𝗼𝗿𝗱𝗲𝗿, 𝗶𝘁’𝘀 𝗮𝗻 𝗼𝘂𝘁𝗽𝘂𝘁.

Banks agree overnight lending rates between themselves. SONIA is the average of all those deals. If those deals move up, SONIA rises – even if the base rate doesn’t.

𝗙𝗶𝘅𝗲𝗱 𝗿𝗮𝘁𝗲𝘀 𝗮𝗿𝗲 𝗯𝘂𝗶𝗹𝘁 𝗼𝗻 “𝗳𝘂𝘁𝘂𝗿𝗲 𝗦𝗢𝗡𝗜𝗔”.

A 5‑year fix is priced off the 5‑year SONIA swap rate – the market’s best guess of where SONIA will sit on average. If swap rates move up, fixed‑rate mortgages follow, base rate or not.

𝗧𝗵𝗲 𝗻𝗲𝘄 𝗽𝗼𝘄𝗲𝗿 𝗽𝗹𝗮𝘆𝗲𝗿𝘀: 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 & 𝗴𝗶𝗹𝘁𝘀.

More mortgage money now comes from debt funds, pension funds and insurers. They’re asking: “For this level of risk, where do I get the best return?”

If UK gilts are paying 4.75–5%, why would they lend on mortgages at 3–4%?

To attract that capital, mortgage rates have to rise.

So you can have: 

- Base rate flat

- SONIA swaps up

- Gilt yields up

…and mortgage rates still increasing.

If you only watch the base rate, you’ll always feel blindsided.

Serious investors watch SONIA, swaps and gilts – and structure their finance around them.

At 𝗔𝘀𝘀𝗲𝘁 𝗔𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻 𝗣𝗮𝗿𝘁𝗻𝗲𝗿𝘀, this is exactly what we track when deciding when to fix, how to structure, and which deals still work in a higher‑for‑longer world.

If you’d like a one‑pager that explains 𝗕𝗮𝘀𝗲 𝗥𝗮𝘁𝗲 𝘃𝘀 𝗦𝗢𝗡𝗜𝗔 𝘃𝘀 𝗦𝘄𝗮𝗽𝘀 𝘃𝘀 𝗚𝗶𝗹𝘁𝘀 in plain English, send us a private DM and we'll share it.