The Bank of England (BoE) has voted to hold interest rates at 5.25% for the fourth time in a row.
Mortgage borrowers who are currently on a variable or tracker mortgage will therefore see no change to their interest rate for the time being.
Those who are fixed rates will see no change until their deal expires and it’s time to remortgage.
With the Base Rate remaining unchanged for several months and other economic factors offering optimism to lenders, mortgage rates have been inching down lately.
So how will today’s decision to hold the Base Rate again impact mortgage prices going forward? Can we expect further cuts?
Mortgage expert, Karen Noye of Quilter, explained lenders had been making their price cuts because of the market view that borrowing costs would remain ‘stable’.
After today’s decision to hold interest rates, she thinks it’s unlikely they will continue with price cuts.
“Without the certainty of a further cut it seems unlikely that mortgage rates can fall much further,” she said.
“The rise in swap rates—an essential benchmark for pricing fixed-rate mortgages—signifies mounting pressures that could reverse the recent trend of falling mortgage rates. This scenario not only affects borrowers but also has broader implications for housing market activity and, by extension, the economy.”
However, with rates already being cut to well below last summer’s high, others are more optimistic for borrowers – many of whom may be waiting to remortgage.
Clare Batchelor, mortgage operations manager at Wesleyan Financial Services, said: “Holding interest rates should help the housing market continue to stabilise, boosting consumer confidence and supporting increasing sales.
“It’s early days yet, but we are seeing a lot more enquiries from buyers. Time will tell if that translates into an increase in mortgage applications and approvals.
“Certainly, there are much better mortgage deals out there than there were last summer, for example, with rates being cut on an almost daily basis by different lenders.
“We’re also seeing a steady flow of remortgage reviews, with clients seeming to have resigned themselves to the fact that they will have to accept higher rates than they could get two or five years ago.”
When will interest rates be cut?
The question now on everyone’s lips is when will the BoE start cutting rates? Predictions are already being made that it is more likely to be in the latter half of the year.
Of the nine-member MPC, one voted today to cut interest rates whilst two wanted to raise them. The remaining six opted for rates to be held.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said this offered clues as to what might happen going forward.
“Financial markets have been betting on a string of rate cuts this year,” she said, “with some analysts expecting changes as early as May but, for now, the BoE is sticking with its cautious stance, stressing it remains determined to keep inflationary pressures at bay.
“Hints of change ahead could be found in the rate-setting Monetary Policy Committee’s split decision.”
She added: “This is a slight shift in stance from December’s 6-3 voting pattern when six voted to leave rates unchanged and three voted for a quarter-point increase.
Meanwhile, Batchelor said borrowers should keep their eye on what happens to inflation. “Looking to the year ahead, if inflation continues its broadly downward trend then hopefully by half year we will have a good idea if lower rates are here to stay,” she said.
But Noye said the mere speculation about rate cuts in itself can have an impact. “[It] fuels optimism for a more buoyant housing market, potentially leading to increased 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, may face upward pressure if the anticipated easing of monetary policy does not materialise as expected.
“Today’s hold in rates marks the first of many decisions this year that will be heavily scrutinised for signs that a drop is on its way.
“For now, borrowers can only play the cards they are dealt and if you are looking to buy or sell, seeking professional mortgage advice can help you understand what’s on offer from the market and whether its affordable for your unique circumstances.”
