Today, the Bank of England (BOE) reduced the base rate from 5.25% to 5%, prompting many to wonder about the potential impact on mortgage rates.
If you’re a homeowner or an aspiring homeowner, here’s what you need to know following the first rate cut in four years. (1)
If you’re looking to remortgage now:
Today’s cut will likely help keep fixed-rate deals low; however, any further reductions are unlikely to be significant.
In fact, it is highly probable that many lenders have already factored today’s rate cut into their CURRENT lower fixed-rate offerings.
This is evidenced by the reduced rates introduced by major lenders such as NatWest and HSBC in recent months.
The BOE Governor, Andrew Bailey, emphasised today that “consumers should not expect the Bank to cut rates as rapidly as it had raised them” and that “average mortgage rates are around 1% lower than they were last year.” (2)
So, while today’s news is certainly positive for homeowners needing to remortgage, it is unlikely that many new products will be offered at significantly lower rates.
This suggests that rather than waiting, now is a comparatively good time to secure a fixed-term deal.
If you have six months left on your current deal:
If you’re approaching the end of a mortgage deal, you should start searching for the best new deals now.
Traditionally, you can lock in a new mortgage term six months in advance, providing protection against any potential rate increases and the flexibility to switch to a cheaper deal, for free, if one becomes available before your current term ends.
If you have six months or less left on your current deal, the wisest move is to start searching the market as soon as possible.
If you’re on a fixed mortgage that isn’t expiring:
There will be no change for now because, regardless of what happens to the base rate, the amount you pay doesn’t change during your fixed period. You are locked in.
You should check rates as your deal approaches its end, preferably at least six months before its conclusion.
If you’re on your lender’s Standard Variable Rate (SVR):
If you’re on your lender’s SVR, the rate you pay might decrease.
You are typically moved onto your lender’s SVR after your fixed or tracker deal ends. Although SVRs can be changed at the lender’s discretion, they usually align with changes to the base rate – so you could be affected.
If you’re on a tracker mortgage:
If you’re on a tracker mortgage that follows the base rate, you’ll see your rate decrease, resulting in a change to your monthly repayment within days or weeks, depending on your next repayment date.
If you’re hoping to remortgage now or understand your financial options a little better:
Your Mortgage People are authorised to give in-depth, professional advice as to your best way forward.
We go beyond other so-called “experts” in the industry by providing bespoke help, guidance and support throughout the journey – often finding solutions when others can’t.
Call us now on 01489 346624 or fill out a contact form to get started.
(1)Interest rates RECAP: Bank of England cuts base rate to 5% in major mortgage relief – Mirror Online
(2) https://www.bbc.co.uk/news/
*Your home may be at risk if you do not keep up repayments on your mortgage
