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Mortgage Rate Pause: Don't Celebrate Yet

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  Published in Business and Finance on Monday, January 12th 2026 at 9:13 GMT by Manchester Evening News

London, UK - January 12th, 2026 - While a brief respite from rising interest rates has been offered today, mortgage experts are cautioning homeowners not to celebrate prematurely. Despite the Bank of England's decision to hold interest rates steady at 5.25% - marking the end of 14 consecutive increases - the possibility of future rises remains a significant concern for many UK homeowners.

The current pause doesn't signal a guaranteed end to the rate increase cycle. Economic indicators remain complex, and the Bank of England has consistently signalled a readiness to act should inflation prove persistent. This leaves millions of homeowners facing the potential of higher monthly mortgage payments in the coming months and years.

Understanding the Current Situation

The decision to hold rates was largely anticipated and reflects a cautious approach by the Bank. Inflation, while still above the target, has shown signs of moderating. However, the global economic landscape remains volatile, and the Bank of England is keen to avoid prematurely declaring victory over inflation.

Expert Advice: Proactive Measures for Homeowners

Sarah Coles, head of personal finance at Hargreaves Lansdown, has issued a clear warning to homeowners: preparation is key. "While the most dramatic rate increases may be behind us, complacency is not an option," Coles stated. "Homeowners need to actively review their mortgage situations and explore strategies to mitigate the potential impact of future rate rises."

Specific Actions Homeowners Should Consider:

• Fixed-Rate Mortgage Holders: Those currently on fixed-rate deals should proactively investigate their options closer to the end of their fixed period. Understanding the likely rates available then will allow for informed decision-making and potentially avoid a payment shock. Mortgage brokers are proving invaluable in this regard, offering comparisons and guidance across a wider range of lenders than most individuals can access independently.
• Variable Rate Mortgage Holders: Variable rate mortgages have already borne the brunt of recent increases. However, it's vital to regularly compare available deals and ensure you're on the most competitive variable rate product. Switching to a different variable rate mortgage, or even considering a shorter-term fixed rate, might offer some protection.
• Overpayments: A Powerful Tool: Coles highlights the significant impact overpayments can have. While seemingly a small addition to monthly payments, consistent overpayments can shave years off a mortgage term and significantly reduce the total interest paid. However, careful consideration is necessary.

Important Considerations Before Overpaying:

• Early Repayment Charges (ERCs): A crucial first step is to thoroughly review your mortgage agreement. Many deals stipulate limits on overpayments without incurring substantial ERCs. Exceeding these limits can negate the benefit of overpaying.
• Budgeting: Overpaying should only be considered if it's financially comfortable and doesn't compromise other essential expenses or savings goals. A detailed budget assessment is essential.
• Lender Communication: Directly contacting your lender to understand the overpayment process and any associated conditions is a vital step.

Current Market Rates

According to Moneyfacts, the average two-year fixed mortgage rate currently stands at 5.34%, while the average five-year fix is slightly lower at 5.08%. These rates reflect the ongoing market uncertainty and the anticipated future path of interest rates.

Looking Ahead

The mortgage landscape remains dynamic. While the immediate outlook may appear stable, homeowners should adopt a proactive and informed approach to manage their finances effectively. Regularly reviewing mortgage deals, understanding the implications of interest rate fluctuations, and considering strategies like overpayments are essential for navigating the challenges ahead and securing long-term financial stability.