The Bank of England voted to keep interest rates at 4%, which means that no change in the repayments of the mortgage lenders.
With inflation high, staying at 3.8% in August, the decision did not come any surprise. Yet it will still come a blow for borrowers on variable or tracker mortgages and those looking for new deals, who may have hoped for a small repayment lighting in the middle of the current financial pressure.
The nine -member decision committee of the Bank of England (BOE) voted seven to two to keep the interest rate at its current level. Two members preferred to lower the rate to 3.75%
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn PartnersThis said that this reflected the Delicate Balancing Act with which the Boe was confronted between supporting growth and containing inflation.
Now consumers are confronted with uncertainty about when the next interest rate can be. Haine added: “While the BOE maintains a cautious approach for future cuts in the midst of persistent inflationary pressure, consumers must approach their finances with care.
“Economic uncertainty and an autumn budget on the horizon, which may provide further tax increases, that households are wise to strengthen emergency funds and prevent them from taking excessive debts to guarantee financial resilience in the coming months.”
What does today’s decision mean for your mortgage?
Those who are on tracker mortgages are most likely that the consequences of an increase or decrease in interest rates are, so maintaining the basic rate means no change for their refunds.
For borrowers who are on fixed rows, their interest is locked and nothing changes.
If you are currently looking for a new deal and are wondering if you should wait for further cuts before you make your move, today’s decision can create an extra level of complexity.
Haine advised: “Anyone who comes from an old deal would be wise to quickly enclose a new product instead of waiting for loan conditions to relieve further.
“The mortgage interest rate has been fluctuating in recent weeks in the midst of uncertainty around the future path of interest rate letings.
“That volatility can continue, especially in the run -up to the budget, because policy makers would like to assess the impact of new tax measures that the Chancellor will roll out.”
First buyers-profit of savings rates
If you are currently looking for your first mortgage, today’s decision will come to keep rates with a glimmer of hope. This is because, although the mortgage interest rate will not fall, your savings will not do either. So if you save for a down payment, you will be advised to continue to take advantage of the higher savings rates offered and, if necessary, to move your money to a better paid account.
Paul Broadhead, head of mortgage and housing policy at the Building Society Association (BSA) said: “For many so-called buyers, another bank rate reduction could not be fast enough.
“Despite the availability of innovative mortgages of construction associations to help people with smaller deposits, and recent regulatory changes that allow lenders to borrow the flexibility to borrow more borrowers, mortgage payability remains one of the greatest barriers to homeowners.”
BSA investigation indeed showed that 61% of the first buyers had enjoyed this with mortgage repayments for new buyers about 30% higher than five years ago, which rose from 18% to 22% of income.
Broadhead added: “Although the affordability pressure continues to exist, having good savings habits can help all households build resilience against financial shocks. Next week is the British savings week where construction associations, credit associations, banks, charitable institutions and many other organizations will come together to get families and individuals out of their money.
“With nearly £ 300 billion in savings inactive in accounts that do not pay interest, the simply relocating money can put hundreds of pounds in people’s pockets.”