1.6 million UK homeowners set to remortgage this year need to consider their options as Bank of England (BOE) Governor, Andrew Bailey, states “we’re not yet at the point where we can cut interest rates”.
Later adding, “we’re on the way” to interest rate cuts.
The BOE’s decision to maintain the base rate at 5.25% (a fourteen-year high) leaves many households pondering whether to opt for a new fixed-term or transition to variable rates, anticipating a potential rate cut later in the year. (1)
Despite a decline in inflation from 11.1% in October 2022 to 3.4% in February, the BOE appears reluctant to reduce interest rates until it is confident in meeting its 2% inflation target. (2)
Economists in the UK speculate that this could materialise as early as the summer, echoing Prime Minister Rishi Sunak’s optimism about the economy rebounding in 2024.
With this in mind, today’s decision to hold rates steady may encourage less risk-averse mortgagors to consider variable rates or explore alternatives such as interest-only options.
Opting for variable rates offers the potential advantage of lower mortgage renewal costs if the base rate is indeed cut in the summer.
However, for many, the substantially higher interest rates associated with variable rates pose a significant financial strain, particularly amid a cost-of-living crisis.
Homeowners on variable rates also increase their vulnerability to mortgage arrears, which can be highly problematic as it limits their ability to switch lenders or secure a new fixed rate until they clear their outstanding payments.
Given these considerations, many homeowners may prioritise the financial stability offered by a new fixed rate, even if it means accepting higher prices compared to their previous remortgaging terms of 2, 3, or 5 years ago.
Especially considering we could potentially still be years away from the 1% or 2% mortgages of recent times.
For those with less than 6 months remaining on their current deal, locking into a new agreement now also provides the added reassurance that they can still switch to a better offer if rates decrease before their current deal concludes.
One thing that is for certain: the decision-making process surrounding mortgages can feel overwhelming.
With mortgage deals constantly evolving—on average, being updated every 15 days—having the expertise of a whole-market broker can be indispensable during the renewal process. (3)
If you’re grappling with decisions regarding your mortgage, consulting with a knowledgeable professional, such as those at Your Mortgage People, can offer clarity and peace of mind.
You can request a consultation with one of our advisors to leverage their years of expertise. Our team is equipped to address the unique aspects of your inquiry, and the initial discussion is entirely free.
To take advantage of our services, you can reach out to us at 01489 346624 or visit our website to schedule a consultation.
Seeking guidance from qualified professionals can provide invaluable support in navigating these complex waters.
*Your home may be at risk if you do not keep up repayments on your mortgage.
(1) https://www.bbc.co.uk/news/live/business-68581527
(2)https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/february2024
(3) https://www.bbc.co.uk/news/business-68574065
