Friday 12th June 2026, London
The Intermediary Mortgage Lenders Association (IMLA) has published a detailed report and accompanying five-minute guide to help mortgage advisers, and anyone working in the industry, to understand swap rates, and why they matter more than Bank Rate when it comes to the pricing of fixed-rate mortgages.
Many borrowers assume that fixed mortgage rates move in line with the Bank of England’s Bank Rate. In practice, fixed-rate products are priced using swap rates, which are set by financial markets and can move sharply and rapidly in response to global events, regardless of what the Bank of England does. When swap rates spike, lenders must reprice their products or withdraw them entirely, sometimes at very short notice.
This disconnect is one of the most common sources of confusion for borrowers, and one of the hardest things for advisers to explain quickly and clearly. The new IMLA publications are designed to help.
The practical significance of this disconnect was illustrated sharply in early 2026. Following the outbreak of conflict involving the US, Israel and Iran, two-year swap rates rose from around 3.6% in early March to more than 4.5% by early May. Average two-year fixed mortgage rates rose from 3.97% to 5.14% over the same period – an increase of more than 1.1 percentage points. Tracker mortgage rates, which follow Bank Rate directly, were unaffected.
How lenders fund fixed-rate mortgages: Swap rates explained, written by Rob Thomas, principal researcher at IMLA and a former economist at the Bank of England, sets out in authoritative detail why fixed-rate mortgage pricing behaves as it does. It explains how most UK lenders fund themselves using deposits and other variable-rate sources, how the swap market allows them to offer fixed-rate products, and why sudden movements in swap rates can force product withdrawals at short notice.
Swap Rates Explained: A Five-Minute Read provides a concise summary of the key points for advisers who need a clear, accessible explanation they can draw on in client conversations without working through the full technical detail.
Kate Davies, executive director of IMLA, said:
“Swap rates have become part of the everyday language of the mortgage market, yet they remain poorly understood outside a relatively small group of specialists. When mortgage rates rise or products are suddenly withdrawn, borrowers want answers, and advisers need to be able to provide them confidently.
“The problem is that the real explanation – that fixed-rate mortgage pricing follows swap rates, not Bank Rate – is not well understood even by many professionals. Rob’s report provides a clear and authoritative account of how fixed-rate mortgages are funded and why swap rates play such a central role in their pricing.
“We recognise that not everyone wants to work through a detailed technical paper, which is why we have also produced a five-minute guide covering the essentials. Together, the two publications give advisers the material they need to have that conversation with confidence.”
Both publications are available to download free of charge from the IMLA website at www.imla.org.uk.
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