Q&A: Should You Wait to Apply for a Mortgage When Interest Rates Might Drop?
Author: Andy Bedford » Publish Date: 30 May 2025
A Common Question from Thoughtful Clients
One of the most frequent and understandable questions I hear from clients—particularly in times of economic uncertainty or media speculation—is:
“Should I wait to apply for my mortgage in case the Bank of England reduces the base rate?”
It’s a smart question, and it’s always wise to consider timing when making any major financial decision. However, the reality of how mortgage pricing works—particularly with fixed rate products—means that waiting rarely delivers the benefit clients hope for. In fact, it can often work against them. This article aims to unpack why that is, by taking a look at how fixed, tracker, and variable rates work, and how lenders operate behind the scenes.
How Fixed-Rate Mortgages Are Priced
Fixed-rate mortgages are not directly linked to the Bank of England base rate in the way some expect. While the base rate does exert influence on the overall interest rate environment, fixed mortgage pricing is typically based on market forecasts and expectations for interest rate movements over the term of the deal—usually 2, 3, 5, or 10 years.
Lenders use instruments like swap rates (essentially, what it costs them to borrow money for a set time) to set pricing. These swap rates are shaped by how financial markets predict interest rates will evolve, not by the rates themselves. So if a base rate reduction has been anticipated for weeks or months, the likely pricing impact will already have been “baked in” ahead of the Bank’s announcement.
A swap rate also encompasses other factors like Gilt and Bond Yields, that compete for funding but can work in converse relationships to central bank interest rates. So Swap rates could be increasing when Central Bank Rates are decreasing.
Moreover, lenders don’t update pricing overnight. Adjusting a product range involves not just repricing, but internal sign-offs, marketing updates, risk reviews, IT platform updates, and strategic planning. Lenders will also consider how aggressively they want to compete, what volume they aim to lend, and which customer profile they want to attract. Because of this, it can take days or even weeks for meaningful reductions to filter through—and even then, they may not be as significant as hoped.
Tracker, Variable, and Discount Rates: How They React to Base Rate Changes
Tracker products are somewhat an exception. These are directly pegged to the Bank of England base rate, typically with a small margin added (e.g., base +0.75%). This means they change almost immediately when the base rate moves. So, if you’re considering a tracker, there’s no need to “wait” for reductions—they’re automatic.
On the other hand, standard variable rates (SVRs) and discount rates, which are usually set by the lender, are a bit more opaque. While SVRs do tend to follow the Bank of England base rate over time, there is no obligation for lenders to pass on reductions at all—or to pass them on immediately. They may wait weeks or months, or choose not to reduce them at all, depending on internal margins, funding costs, and business strategy.
The Risk of Waiting for Rate Drops When Remortgaging
For clients looking to remortgage, the cost of waiting can be particularly high. If your current fixed deal is coming to an end, and you don’t secure a new product in time, you’ll usually revert to your lender’s SVR—which is often several percentage points higher than new fixed deals on the market.
If you delay applying in the hope that rates will drop, you risk:
- Falling onto the reversion rate, which is significantly more expensive.
- Running out of time to move lenders, which may limit you to a less competitive product with your current lender (who may not be offering their best rates to existing customers).
- Exposure to changes, as you secure the deal when you apply, you risk increases whilst you wait.
- Missing savings, as the extra monthly payments on the SVR can quickly offset any future gains from a small rate drop.
Unless we were anticipating a dramatic, sudden rate cut—which is historically rare—waiting simply doesn’t tend to pay off.
Once You Apply, the Flexibility is Yours
Another often overlooked advantage of applying early is that you usually lock in protection against rate increases once your application has been submitted.
Better still, most lenders allow us to switch you onto a lower rate, if they release one, right up to a couple of weeks before completion. This provides the best of both worlds—you’re shielded from potential increases but can still take advantage of reductions if and when they occur.
That’s why our standard process is to continue checking for better deals after your offer is issued, and we’ll let you know if a better rate becomes available with your lender during your transaction.
Final Thoughts: Waiting May Cost More Than It Saves
While no one can predict the market perfectly, experience has shown that trying to “time” the mortgage market is often a losing game. Yes, lenders come in and out of competitiveness, and from time to time the perfect deal may appear—briefly. But trying to wait for that perfect moment often results in missed opportunities, limited options, or higher costs.
In most cases, the wisest move is to apply sooner rather than later—secure your position, keep your options open, and retain the flexibility to pivot if something better comes along.
And as always, I’ll be here to monitor things on your behalf throughout the process—but do make sure to check in with me again around two weeks before you’re due to complete, so we can perform a final check and make sure you’re still on the most competitive deal available.