The Bank of England (BoE) has decided to keep interest rates at 5.25% for the fourth time in a row.
Mortgage borrowers who currently have a variable or tracker mortgage will therefore see no change in their interest rate for the time being.
Those with a fixed rate will see no change until their deal expires and it’s time to get a new mortgage.
With the base rate unchanged for several months and other economic factors offering optimism to lenders, mortgage rates have been slowly declining lately.
How will today’s decision to hold the base rate again affect mortgage prices in the future? Can we expect further cuts?
Mortgage expert Karen Noye of Quilter explained that lenders had gotten their money’s worth price reductions due to the market view that financing costs would remain ‘stable’.
Following today’s decision to maintain interest rates, she believes price cuts are unlikely to continue.
“Without the certainty of a further reduction, it seems unlikely that mortgage rates can fall much further,” she said.
“The rise in swap rates – a key benchmark for pricing fixed-rate mortgages – signals mounting pressure that could reverse the recent trend of falling mortgage rates. This scenario not only impacts borrowers, but also has broader implications for housing market activity and, by extension, the economy.”
However, with interest rates already cut well below last summer’s highs, others are feeling more optimistic about borrowers – many of whom may be holding off on remortgaging.
Clare Batchelor, mortgage operations manager at Wesleyan Financial Services, said: “Holding interest rates should help the economy housing market continues to stabilizeincreasing consumer confidence and supporting sales growth.
“It’s still early, but we’re seeing a lot more questions from buyers. Time will tell if that translates into an increase in mortgage applications and approvals.
“Certainly, there are much better mortgage deals than last summer, with interest rates being cut almost daily by various lenders.
“We are also seeing a steady stream of remortgage reviews, with customers appearing to have resigned to the fact that they will have to accept higher rates than they could get two or five years ago.”
When will the interest rate be reduced?
The question on everyone’s lips now is: when will the BoE start cutting rates? Predictions are already being made that this will be more likely in the second half of the year.
Of the nine members of the MPC, one voted today for a reduction in interest rates, while two wanted to increase them. The remaining six chose to maintain rates.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said this offered clues about what could happen in the future.
“Financial markets have been betting on a series of rate cuts this year,” she said, “with some analysts expecting changes as early as May, but for now the BoE is sticking to its cautious stance and emphasizing its commitment to keeping inflation high. remote pressure.
“Clues to future changes can be found in the split decision of the rate-setting Monetary Policy Committee.”
She added: “This is a small shift in position from the 6-3 voting pattern of December, when six voted to leave rates unchanged and three voted for a quarter-point increase.
In the meantime, Batchelor said borrowers should keep an eye on what’s happening inflation. “If inflation continues on its largely downward trend over the next year, hopefully by six months we will have a good idea whether lower rates will last,” she said.
But Noye said the mere speculation about rate cuts could have an impact in itself. “[It] fuels optimism about a more buoyant housing market, potentially leading to greater affordability for homebuyers,” she said.
“However, the path forward is fraught with uncertainty. Fixed-rate mortgages, which have so far benefited from a more competitive environment, could face upward pressure if the expected easing of monetary policy does not materialize as expected.
“Today’s rate cut marks the first of many decisions this year that will be heavily scrutinized for signals that a decline is coming.
“For now, borrowers can only play with the cards they are dealt. If you are looking to buy or sell, seeking professional mortgage advice can help you understand what is on offer in the market and whether it is affordable for your unique circumstances.”