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Base Rate Held Again at 5.25%: What Can We Expect from Mortgage Rates?

LATEST NEWS | 24.06.2024

Inflation has fallen yet the interest rate remains the same for the seventh time in a row, at 5.25%. This is understandably a blow to homeowners and borrowers, but what does the future look like for the UK mortgage market right now?

Inflation has fallen yet the interest rate remains the same for the seventh time in a row, at 5.25%. This is understandably a blow to homeowners and borrowers, but what does the future look like for the UK mortgage market right now? Let’s take a look at what the Bank of England’s latest meeting had in store for UK mortgage rates.  

What’s the Latest from Thursday’s Bank of England Meeting?

It has been announced that inflation has finally fallen, for the first time in 3 years, to the Bank of England’s target of 2%, down from 2.3% in May. However, it has come as a shock to many to learn that even though inflation is back at its target, interest rates remain at 5.25%.  The Confederation of British Industry (CBI) has stated that “the stage is now set for the bank to cautiously cut interest rates in August” However, with a change in government likely, it could be that the Bank of England might be tempted to wait as long as autumn.  

How is Inflation Linked to Mortgage Rates?

The Bank of England uses interest rates to help control inflation. The interest rate sits at 5.25% to try and control the demand for goods by making it more expensive for people and businesses to borrow money. This stops or makes it much more difficult for businesses to continue increasing their prices, helping to contribute to the slowdown in inflation. Individual borrowers and lenders agree on their mortgage rates which are usually set higher than the Bank of England’s base rate, apart from the types of mortgages that follow the base rate, such as SVR’s. Depending on which type of mortgage you have will determine how you are affected by the rise in interest rates. Discounted, tracker, and standard variable rate (SVR) mortgages follow the bank’s interest rate movement. A fixed-rate mortgage remains the same for a set period regardless of whether the interest rate rises or falls, however, once the fixed term ends, borrowers are automatically moved over to the lenders SVR, which follows the banks base rate.   

So, What’s in Store for UK Mortgage Rates in the Near Future? 

From the news released today of yet another stalemate, the near future doesn’t seem that bleak. NatWest has actually cut the cost of their fixed-rate mortgage by up to 0.17% in light of today’s news, which includes first-time buyers, shared equity, and help-to-buy deals. Their 5-year fixed rate for remortgage now starts from 4.26%, (online only) it has a £1,495 fee and borrowers must have at least 40% equity in their property. Its equivalent 2-year fix starts from 4.82%. Industry experts believe that this still puts us on track for a drop in interest rates by 1st August this year. Even so, it's still incredibly important to shop around if you're due to remortgage, as locking in early, around 6 months ahead, will provide you with safety should the rate increase but also mean that payments remain the same if the rate drops.  If your current fixed rate ends sooner than expected, then a tracker without early repayment charges would be the next best thing. This means that if the rate reduces you could move to a new fixed rate without a penalty charge, but keep in mind that trackers are currently around 1% higher than the cheapest fixed-rate deals.  If you are currently on a tracker then there is no change, due to the base remaining at 5.25% and if you are currently on your lender’s SVR, you are at the mercy of your lender and can become extremely expensive very quickly. By using a trusted mortgage advisor to help you search for the best deals on the market, you could save yourself a fortune.  

Speak to a Trusted Mortgage Advisor in Manchester Today

At Taylor Made, we understand the financial difficulties facing everyone right now, that’s why we are a dedicated, professional, and independent mortgage broker in Manchester with access to the best mortgage rates on the market today. Our friendly, helpful advice could be just the solution you need if you find yourself not knowing which way to turn. So, contact Taylor Made today: we are the expert mortgage broker in Manchester also operating throughout the UK.
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