For anyone with a tracker or variable mortgage, this means that the rates remain the same. It also offers some reassurance for anyone considering a fixed-rate mortgage.
However, with seven of the nine members of the Bank of England’s (BoE) Monetary Policy Committee voting in favor of a hold on the base rate and two favoring a 0.25% increase, it is clear that a rate cut is unlikely for the time being.
The committee said that despite the recent fall in inflation to 2.8%, it expected it to rise again due to the knock-on effect of energy price rises, which could also impact businesses and wages.
Susannah Streeter, chief investment strategist at the Wealth Club, said: “Policymakers are playing a game of patience, slowly shuffling their latest data cards and taking time to debate where inflation will land next.”
She added: “Another rate hike is still being planned in the financial markets, but forecasts of multiple rate hikes have been scaled back.
“Policymakers remain cautious and do not want to tip the economy into reverse, but remain vigilant to keep unruly inflation under control.”
What happens now with your mortgage?
The Bank of England base rate provides a benchmark for the cost of borrowing and this will therefore influence the cost of mortgages. How this affects your mortgage depends on the type of deal and how far along you are in the deal.
Track mortgage holders
Maintaining interest rates is most important for those with a tracker mortgage. While you won’t see a reduction in your repayments, you won’t experience an increase either. However, there are predictions of another rate hike this year, and with two BoE policy makers voting for a 0.25% rate hike today, it could be worth preparing for the inevitable.
David Hollingworth, Deputy Director at L&C MortgagesThe aforementioned tracker mortgages have become increasingly popular recently as more borrowers opted to gamble on interest rates remaining low.
He added: “There is of course no guarantee and markets have still priced in the possibility of higher interest rate rises, so borrowers should consider how well they can cope with rising payments.”
Fixed-rate mortgage borrowers
If you’re currently locked into a fixed-rate mortgage that doesn’t expire within the next six months, today’s decision won’t affect your repayments. For those with a deal expiring soon, find more advice below.
Borrowers looking for a new mortgage deal
A rate cut will provide some reassurance to buyers or borrowers, explains Ben Thompson of the Mortgage Advice Bureau, as it provides a sustained period of stability. After all, the next interest rate decision will have to take place on July 30.
But he also said his research found that 41% of potential buyers were waiting for a ‘sign’ before taking the next step, and that this period of stability could provide some of the reassurance they were looking for.
Nevertheless, he advised anyone coming to the end of their current deal to review your options early.
“While many are moving away from historically low fixed rate products and may face higher repayments, lenders continue to compete for business, and competitive deals are available for those who are well prepared,” he said.
“As always, seeking expert mortgage advice remains crucial to securing the most suitable deal for your circumstances.”
Starters and movers
Thompson said a waiting period gave first-time buyers more confidence when budgeting for mortgage repayments, and could encourage more people to move forward with their home-buying plans.
But for those getting onto the property ladder or for homeowners looking to take their next step, it is advisable to seek advice from an estate agent.
This is especially true for anyone who is unsure whether to choose a tracker or is wondering whether to repair it for the short or long term.
When it comes to trackers, Hollingworth advises that they are better suited to people with some flexibility in their disposable income.
“However, trackers are more widely available with no early repayment fees, so there is at least a way out if interest rates take another turn and rise steeply,” he explains.
But he thought most people will be looking for the security of a flat rate. In recent weeks, prices have fallen based on fixed interest rates, which are set based on swap rates rather than the BoE base rate.
Sarah Tucker, mortgage expert at HomeOwners Alliance, explains: “We have seen fixed rates fall in recent weeks and swap rates – which are a strong indicator of lenders’ funding costs – have continued to fall this week as a result of the US-Iran peace deal.
“But what happens next with the pricing of fixed-rate mortgages will largely depend on what markets think is next for interest rates. So all eyes will be on the vote split and the Monetary Policy Committee’s commentary for clues about the direction of future rate cuts.”