I am writing this as general information for people in England. It is not personal advice. Nothing here is a prompt to remortgage, switch, fix, or wait. I am not picking a product, and I am not naming lenders.

Not a forecast, and not a mortgage quote

A mortgage rate is a stack. Overnight rates are one layer. A longer-term market price is another. The lender's own margin, fees, loan-to-value and the terms of the contract sit on top of that. Those layers do not have to move together.

I have already written about the latest Bank Rate decision, and about why Bank Rate is not the same thing as a mortgage quote. I will not repeat that piece here. This one is about how the price is built.

Bank Rate and SONIA

Bank Rate is the interest rate the Bank of England pays on reserves that commercial banks and building societies hold at the Bank, and the rate it charges if it lends to them through its facilities. The Monetary Policy Committee sets it. It influences other rates. It is not itself a mortgage rate, a savings rate, or a swap rate.

As at 4 October 2026, Bank Rate is 3.75%. It has stood at 3.75% since 18 December 2025, and it was held again at the September 2026 meeting. The next announcement date on the Bank's calendar is Thursday 5 November 2026. That is a diary fact. It is not a deadline, and it is not a view on what the Committee will do.

SONIA (the Sterling Overnight Index Average) is the average interest rate banks pay to borrow sterling overnight, without security, from other banks and from other institutional investors. It is based on actual transactions. The Bank of England administers it and publishes it every London business day. Wholesale markets use it as the sterling overnight risk-free rate, including as the floating leg of sterling overnight index swaps.

SONIA and Bank Rate are close neighbours, not the same thing. On the latest print in the free database when I checked, SONIA was 3.7329% for 30 September 2026, against Bank Rate at 3.75%. The Bank's own yield-curve notes say SONIA is typically reasonably close to Bank Rate. That describes how the two are built. It is not a promise that the gap stays fixed. SONIA is not a mortgage price.

We do not set Bank Rate or SONIA at Octo Financial Planning Ltd. We are describing official rates, not choosing them.

The curve behind a new fixed rate

A swap, in plain English, is a contract. In a sterling overnight index swap, the two sides exchange the difference between a fixed rate agreed at the start and the compounded SONIA rate that actually occurs over an agreed term. The principal of a mortgage is not what is being lent inside that swap. The fixed rate is a market price for SONIA over that term.

The Bank of England says these contracts exchange a payment linked to a predefined interest rate for one linked to compounded overnight SONIA, and that overnight index swap rates should contain very little compensation for credit risk because of how the contracts are structured. The fixed leg reflects the path of overnight rates over the term that is already in market prices, plus any premium for uncertainty. That is a price. It is not a Bank of England forecast, and I am not going to narrate it as "what the market knows will happen".

Each business day the Bank estimates curves from UK government bond (gilt) yields, and a separate curve from sterling overnight index swap rates, which settle on SONIA. It publishes spot rates on that fitted curve. Those spot rates are continuously compounded and quoted on an annual basis. The Bank says it does not provide support for turning these yields into other quoting conventions.

On 1 October 2026, the Bank's fitted overnight index swap spot was 4.54% at two years and 4.65% at five years (4.5371% and 4.6521% before rounding to two decimal places). These are fitted OIS spots. They are not the par SONIA swap a lender would type into a pricing model that day, and they are not a mortgage rate. I do not have that desk screen level from a free Bank of England page, so I am not going to invent one or borrow it from a secondary site.

The Bank also fits a curve to gilt yields. That is a different object: government bond yields, not swap rates, and not mortgage rates. I am not printing those gilt spots here, so the two curves do not get mixed up.

A new fixed-rate mortgage keeps the same interest rate for a set period, such as two years or five. The lender is taking a view on the cost of money over that whole period, not on yesterday's Bank Rate alone. A usual wholesale building block is the fixed leg of a SONIA swap for a similar term. On top of that building block sits the lender's margin: funding mix, credit risk, operating costs, competition, and return on capital. I do not have a formula for that margin. I am not going to subtract a curve rate from a quoted mortgage rate and call the difference "the margin". Those numbers are not in the same quoting convention, and a fee can sit outside the published rate.

A Bank Rate change does not have to move new fixed deals one for one:

  • Bank Rate is an overnight policy rate. A two-year or five-year fix is a price for a longer window.
  • If Bank Rate changes but the curve for that window does not move by the same amount, the wholesale building block for new fixes does not move one for one.
  • The lender's margin can also change, for competition or for credit, in either direction.
  • A fee can be doing some of the pricing work. The Bank's quoted-rate series are headline rates.

None of that is a prediction of the next fixed-rate move. It is why the two numbers can diverge.

Trackers, revert-to rates, and a fix that is already running

This is where Bank Rate matters more directly, and even here the link is contractual. It is not automatic for every product with the word "variable" on it.

A lifetime tracker, in the Bank's quoted-rates notes, is a product linked to Bank Rate, or to the lender's equivalent rate, for its term. Where a contract says Bank Rate plus a set margin, the pay rate moves when Bank Rate moves, by that margin, on the terms of that contract. Caps, floors and notice periods are contract terms. I am not listing them, and I am not quoting a lifetime-tracker average.

A revert-to rate (what many people still call a standard variable rate) is a rate the lender sets. The Bank renamed its old "SVR" series to "revert-to-rate". These rates often change after a Bank Rate change, but they are not a mechanical "Bank Rate plus X" unless that lender's contract says so. Lenders do not all move by the same amount, or on the same day.

In August 2026, the average advertised revert-to rate in the Bank's quoted series was 6.58%. That is an average of advertised rates. It is not your rate, and it is not a reason to leave a current deal.

Discounted or short-term variable deals sit in between. The Bank defines some of them as a discount to the lender's own revert-to rate, and others as a margin over Bank Rate for a set term. The label "variable" on its own does not say which.

During a fixed period, Bank Rate can change without the pay rate on that fix changing. At the end of the fix, what happens next depends on the contract: a new product, a tracker, or the lender's revert-to rate. I am not telling you which of those to choose. This piece is about how new prices are built, not about leaving a deal you already have.

Margin, fees, and loan-to-value

A few other inputs sit in the price. I am keeping them as concepts.

Funding. Swaps are a reference for the interest-rate part of funding a fix. Lenders also fund from deposits and from other wholesale markets. If those sources get more expensive, or cheaper, mortgage prices can change even when Bank Rate does not. I do not have a current figure for a deposit-funding spread, so I am not inventing one.

Competition. Quoted rates are advertised prices. Lenders move headline rates to win business or to slow it. That can widen or narrow the gap over wholesale rates without Bank Rate having changed.

Credit and loan-to-value. A higher loan-to-value loan is a different risk from a lower one. In the Bank's August 2026 quoted series, the average advertised two-year fix at 75% loan-to-value was 4.92%, and the average advertised two-year fix at 90% loan-to-value was 5.16%. I am using that pair only to show that credit risk shows up in the advertised average. It is not a suggestion to borrow at 75%, or at any other level. Affordability, the property, and your circumstances are individual.

Fees. A lower rate with a product fee and a higher rate with no fee are not the same total cost. The Bank is explicit that fees and cashback are used to pick which advertised rate enters the quoted series, on an illustrative loan, and that the fee does not then get folded into the published rate. So those averages are not a true-cost ranking. I can name the trade-off. I will not illustrate it with a real product, and a lower headline rate is not automatically the cheaper mortgage.

These figures are not one rate

Read this table as a set of references, not an offer. The rows are not all from the same day. August 2026 mortgage averages are not October offers. Loan size, fees, loan-to-value and the person all change a real price. Please do not subtract one row from another and call the result a margin.

Quoted averages below are weighted averages of headline advertised rates, not APRs. The fee is not inside the percentage. They are not seasonally adjusted.

What it is Figure As at What it is not
Bank Rate 3.75% Since 18 Dec 2025; held again in Sep 2026 Not a mortgage rate, a savings rate, or a swap rate
SONIA 3.7329% 30 Sep 2026 Not Bank Rate, and not a mortgage price
Bank fitted 2-year OIS spot 4.54% 1 Oct 2026, continuously compounded Not a desk par swap, not a forecast, not a mortgage rate
Bank fitted 5-year OIS spot 4.65% 1 Oct 2026, same convention Same caveat as the 2-year spot
Quoted 2-year fix, 75% LTV 4.92% 31 Aug 2026 average Not an offer; fee not inside the rate
Quoted 5-year fix, 75% LTV 4.78% 31 Aug 2026 average Same
Quoted 2-year fix, 90% LTV 5.16% 31 Aug 2026 average Shows LTV in the average, not a rate to aim at
Quoted revert-to rate 6.58% 31 Aug 2026 average Not your SVR
Effective rate on newly drawn mortgages 4.60% August 2026 Not the quoted 2-year fix, and not a swap
Effective rate on the mortgage stock 4.00% August 2026 The stock, not new business

Sources for this table (as at 4 October 2026):

  • Bank Rate 3.75%: Bank of England Bank Rate page; Bank Rate history (in force since 18 December 2025; held again at the September 2026 meeting).
  • SONIA 3.7329%: Bank of England database series IUDSOIA for 30 September 2026; SONIA benchmark page.
  • Fitted 2-year / 5-year OIS spots 4.54% / 4.65%: Bank of England yield-curve data zip, observation date 1 October 2026, continuously compounded (fitted spots, not desk par swaps).
  • Quoted 2-year 75% LTV 4.92%, 5-year 75% LTV 4.78%, 2-year 90% LTV 5.16%, revert-to 6.58%: Bank of England database series IUMBV34, IUMBV42, IUMB482, IUMTLMV, averages for the month ending 31 August 2026.
  • Effective rate on newly drawn mortgages 4.60% and on the mortgage stock 4.00%: Bank of England Money and Credit, August 2026 (published 29 September 2026).

The effective rate is the average rate actually paid. On new drawings it is not the same object as the advertised two-year fix. On the outstanding stock it is not the same object as new business. All of these can be true on the dates shown without any of them being "the mortgage rate".

Three mix-ups

"The Bank of England rate is the mortgage rate." Bank Rate is 3.75%. The advertised fixes, the effective rate on new drawings, and the revert-to average in the latest official data above were all different numbers.

"If Bank Rate is cut or raised, every mortgage rate moves by the same amount, the same day." A tracker that says Bank Rate plus a margin is built to move with Bank Rate, on the contract. A new fix looks at the term, through the swap market, plus the lender's margin. An existing fix does not change in the middle of the fix just because Bank Rate changed. A revert-to rate is the lender's own decision.

"The two-year number on the Bank's curve is the two-year swap my lender uses, or the Bank's forecast." The published spot is a continuously compounded fitted rate on 1 October 2026. A mortgage desk's par swap is a different quoting convention, and I have not printed one. A swap is a market contract. The Bank's curve is a fit to market prices. It is not an MPC projection.

If you want the labels straight: Bank Rate, SONIA, a fitted overnight index swap spot, a quoted mortgage average, an effective rate, and a revert-to rate are different things. Which part of a price moves with Bank Rate, which part moves with the curve, and which part is the lender's, is the useful question. I am not calling the next move in any of them.

Our mortgages page is background on the work, not a list of deals. If your own arrangement, your own revert-to rate, or a fix that is coming to an end is something you want looked at against your circumstances, you are welcome to get in touch with me at Octo Financial Planning Ltd. That is optional. It is not a recommendation to switch, to wait, or to take a particular product, and it is not tied to the November announcement.

This is general information, not personal advice. Before anyone could recommend a mortgage or other product for you, they would need to meet you and go through your full details first. Nothing here skips that step.

Craig Shilling, Octo Financial Planning Ltd. Octo Financial Planning Ltd is an appointed representative of 2plan wealth management Ltd which is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 972331.

Sources (as at 4 October 2026)