The rate riselands on the refinance

CThe Monetary Policy Committee voted 8 to 1 on 5 November 2026 to raise Bank Rate by 0.25 points to 4%, with one member voting for 4.25%. It expects CPI inflation, 3.5% in September, to reach around 5% by the middle of 2027 as energy prices stay high, and notes that benchmark two-year mortgage rates had risen by nearly 50 basis points since the start of September¹.

CDemand was already thinning. Approvals for house purchase fell to 53,400 in September, below a six month average of about 58,800, while approvals for remortgaging rose from 34,000 to 42,600². Nationwide put annual price growth at 0.5% in October, the weakest since January 2024⁴.

CThe Bank's own figures show the cost of moving from an old loan to a new one. In September the effective rate on newly drawn mortgages was 4.63%, against 4.03% on the stock of mortgages outstanding³. Both figures predate the rise, and the Committee records that market rates have continued to feed through to households¹.

AThat gap of 0.6 points is the step a typical borrower takes when a fixed rate ends, before any further rise. For an investor it lands on the rent cover a lender tests, on a property whose value is flat. The refinance is where this decision bites first.

AThe owners most exposed combine a fix that ends within twelve months, a high loan to value and rent that only just covers the interest. Issue 09 added a second pressure for those who own in their own name: the tax on rent rises from April 2027, while relief on interest stays at the basic property rate.

AWhere those owners must sell, they meet fewer funded buyers. A market with falling purchase approvals and rising refinancing is where motivated sellers appear, and where a buyer with cash or agreed finance has room to negotiate.

AInvestors and lenders should price every refinance due before the end of 2027 at the rate on new lending, and test it again at a further rise. A plan that works only if rates fall back is a bet on the Committee. Acting early keeps the choice of refinancing, paying down debt or selling.

OUR PERSPECTIVE

The rate on the loan is history. The rate on the refinance is the price.

CThe Committee is split on what comes next. One member sees no start of a hiking cycle and says the next move could be up, down or sideways, while others expect more tightening, one of them in the near term¹.

CAustralia shows the harder path: its central bank raised its cash rate to 4.85% on 3 November while saying house prices have fallen significantly⁵. The softer path is in Nationwide's data: incomes have outpaced house prices, so the gain in affordability has been only partly unwound⁴.

IIf energy prices ease and Bank Rate stops at 4%, the refinance gap narrows and fewer owners are forced to sell. Further rises would widen it. Both depend on decisions not yet taken.