Swap rates on the slide since rates cut

Swap rates on the slide since rates cut – suggesting sunnier days on the horizon for nation’s borrowers

CEO of Octane Capital, Jonathan Samuels, has highlighted how the reduction in swap rates seen following the latest base rate cut by the Bank of England, suggests that the nation’s homebuyers and buy-to-let investors could soon be benefitting from more palatable mortgage rates.

Octane Capital analysed the latest figures on 5 year swap rates to reveal how they are currently trending and what this means for the wider property market when it comes to mortgage affordability*

What are swap rates?

Mortgage market swap rates reflect the price lenders have to pay financial institutions when securing fixed rate funds, which they use to offset short-term risks associated with fixed rate mortgages. They are generally based on government bonds called Gilt yields, which reflect what the market anticipates will happen to interest rates down the line.

In sum, the cost of swap rates filter through to mortgage rates, whether they rise or fall – and currently they’re falling.

Swap rates trending downwards

The analysis by Octane Capital shows that, so far this year, swap rates have been trending downwards.

The research shows that since the Bank of England cut interest rates to 4.5%, the average 5 year swap rate has sat at 4.16.

Prior to this base rate cut, 5 year swap rates had sat considerably higher, averaging 4.23% between the Autumn Budget and the end of last year, before climbing to 4.31% between 1st and 6th January this year.

Mortgage rates already following suit

Further analysis by Octane Capital shows that whilst it’s still relatively early days, the nation’s borrowers are already benefiting from reducing swap rates.

In 2024, the average buy-to-let mortgage rate sat at 4.53%, but had fallen to an average of 4.38% in January of this year, whilst the average mortgage rate offered to owner occupiers has fallen to 4.65% in 2025 vs an average of 4.81% seen in 2024.

Jonathan Samuels, Octane Capital CEO, commented:

“It is, of course, still very early days, but current market indicators suggest that there is light on the horizon for the nation’s home movers and buy-to-let investors and the year ahead is set to be one of far greater positivity when compared to 2024.

Not only have we seen swap rates trending downwards so far this year, but this is a trend that will have been strengthened by the Bank of England’s decision to cut the base rate to 4.5% last week and some industry sources are already showing 5 year swap rates having fallen below the 4% threshold, which is big news.

We’ve also seen lenders act with greater confidence, choosing to reduce mortgage rates in anticipation of the recent interest rate cut and this simply wasn’t the case during the closing stages of last year despite us seeing two base rate reductions.

So, all in all, the outlook is a very good one for the year ahead and we expect mortgage affordability to continue to strengthen over the coming months, bringing a much needed boost to property market sentiment.”