The Bank of England (BoE) has kept interest rates at 5%, despite many borrowers hoping for another cut to ease pressure on repayments.
Eight of the nine members of the central bank’s Monetary Policy Committee (MPC), which decides what to do with the base interest rate, voted in favor of maintaining the current level.
But while this shows that this move was decisive, experts widely predict that much-needed rate cuts will come before the end of the year.
The decision comes after a survey by the Building Societies Association (BSA) found that almost half of consumers thought the MPC should have cut rates again today. This figure rises to 59% among mortgage lenders.
Paul Broadhead, head of mortgage and housing policy at the BSA said: “The reduction in bank interest rates last month marked a major turning point in what had been a difficult two and a half years.
“In reality, however, removing just 0.25 percentage points from the bank rate has had no significant impact on mortgage affordability or confidence in the housing market, despite the markets having priced this into mortgage rates.
“First-time buyers, who are crucial for a well-functioning housing market, still indicate that they cannot afford their own home.”
Broadhead added: “We still expect bank rates to fall this year, but this will happen much later and more slowly than we expected earlier this year.”
How does the interest rate affect your mortgage?
Today’s decision by the BoE to keep interest rates at 5% will be a blow to those hoping for a cut. But what direct consequences does this have for your mortgage?
For borrowers who have already taken out a fixed rate, nothing will change, as the interest rate is fixed until the mortgage expires.
Meanwhile, borrowers on tracker mortgages with interest rates in line with the Bank of England base rate will also see no change for the time being. They will undoubtedly be eagerly awaiting the next MPC meeting on Thursday, November 7.
If you’re a homeowner on a fixed-rate mortgage and you’re looking for a new mortgage in the next six months, today’s decision is on your radar.
You will have benefited from price cuts in recent weeks Lenders have lowered rates on fixed rate agreements. Some products for people with high net worth are now coming onto the market with rates below 4%.
But for those of you who are weary of historically low interest rates, a further reduction in interest rates today would have been particularly welcome.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Borrowers whose cheap fixed-rate deals – taken before the BoE’s tightening cycle began – are about to expire will get a big jump in repayment when they refinance.
“Their next big decision revolves around whether it is best to lock in another fixed rate deal, or whether a tracker might work best in the longer term?
“Whichever option they choose, entering into a new deal is crucial or they risk falling back on their lender’s extremely expensive standard variable rate, with the average SVR remaining high at just under 8%. ”
For those who are struggling to pay their mortgage, or are concerned that they may face repayment issues in the near future, Paul Broadhead advice offered.
“Anyone concerned that they may experience financial difficulties in the coming months should contact their lender as soon as possible, preferably before they miss out on payments,” he said.
“Lenders have a range of practical, tailored support available for anyone who is struggling.”