The Interview Question Hiding in Your Mortgage Rate

The average two-year fixed mortgage rate has risen by nearly a full percentage point since February. That single number has changed more for firms with conveyancing departments than any legislation this year.

And it's exactly the kind of thing you'll be tested on. Imagine you're sat in an interview and you're hit with: "So, tell me, what should my firm be preparing for in the near future?" Don't panic. This is a sneaky way of asking a commercial awareness question, and by the end of this article you'll be able to answer it better than almost anyone else in the room. Because here's the thing: giving general commercial awareness is what every single one of your competitors will be doing. To stand out, you need to understand what the impacts actually are, and what firms could be doing to protect themselves.

So let's break down what's happening.

The Bank of England has held its base rate at 3.75% since the start of 2026, which is not ideal news for a market that was expecting cuts which haven't materialised. There are a number of factors behind this, but the major one is the Middle East conflict pushing energy prices up. As energy prices have increased, so has inflation, which has forced the Bank of England's hand: cutting rates now would risk inflation climbing further. The result is that mortgage rates rose independently of the base rate, with the average two-year fixed rate climbing from 4.83% in late February to 5.53% by the end of June. In practical terms, on an average mortgage of £300,000, that's an extra £1,368 a year. Mortgage approvals have fallen with it, down 11% in May 2026 compared to a year earlier.

These are just numbers, though, so let's break down how they're actually affecting people. Higher fixed rates mean higher monthly mortgage payments, and lenders' affordability calculations shrink alongside them. On the same salary and savings, you can borrow less overall, and on the same loan value, you're paying back more each month. Buyers can afford less than they could in February, which means properties that were within reach then are now out of range. The market slows because the buyers simply aren't there at current prices. For sellers, that leaves two options: drop the price or wait it out. Zoopla's statistics suggest 44% of sellers who listed couldn't sell. The key point to understand is that this rate rise isn't coming from the Bank of England. It's coming from global uncertainty, and that means there's no easy fix from Threadneedle Street.

How does this affect the day-to-day solicitor in conveyancing? The obvious answer is that fewer matters are coming through the door. The less obvious one is that mortgage offers are valid for less time because of the market fluctuations, which creates more pressure on chains and, in some cases, collapses them altogether. When a buyer pulls out of a matter, it causes significant delays for the rest of the chain while a new buyer is found, and that plays havoc with short mortgage offer expiry dates. Firms will also see a rise in leasehold, shared ownership and buying scheme transactions: as lending capacity diminishes, people are forced to look at alternatives to freehold properties. These transactions take longer to complete because of the third parties they introduce into the matter, and they carry hidden costs, either at the time or when the client comes to sell, from management packs, notice fees, Deed of Covenant fees and more.

So how does this truly affect firms? Beyond the reduction in matters, which is the obvious part, you have the shift in the type of work. As more people are pushed into leasehold, shared ownership and other buying schemes, the legal work gets more complicated and more time consuming. The hardest hit will be the high-volume conveyancing firms, because they'll need to employ or train staff to deal with the more complex cases. Specially trained staff cost the firm more, and the cases take longer to complete. Since most firms only get paid on conveyancing matters once the matter completes, this can create real cash flow problems.

One more thing to keep an eye on: the Housing, Communities and Local Government Committee has recommended a formal consultation on SDLT reform by the end of 2026, which could result in new policies offsetting the falling transaction rate. The talks range from reducing rates to completely replacing the tax, so it's still very much unknown how this will affect the market.

If you get a commercial awareness question like the one at the start of this article, here's how I would answer it:

"If I was in your position, knowing this firm has a large conveyancing department, I would be putting plans and failsafes in place for the slowing of the market. The increase in mortgage rates is pushing clients into more specialist areas of conveyancing, such as shared ownership, because overall prices have risen while borrowing eligibility has decreased. I would make sure there are enough members of staff fully trained in these types of transactions. I would also reach out to current and potential referrers of work to keep developing those relationships. That is what keeps the pipeline flowing through a slowdown. And I would keep a very close eye on the SDLT reform consultation, because it could change the whole industry."

That answer works because it doesn't just describe the problem. It shows you understand what a firm should do about it. That's the difference between reading the news and being commercially aware.

Stick with me and you'll develop not just an understanding of what's happening around you, but a way of thinking about it that most applicants never reach.