The Bank of England has cut interest rates to 4.25% offering some much-needed relief for mortgage borrowers.
It had been widely expected a cut of 0.25% would take place today so many homeowners and buyers will have factored these cuts into their calculations.
What’s more, mortgage lenders have already been cutting the interest on their fixed-rate products meaning there are already some competitive deals on the market for borrowers.
However, today’s decision by the Central Bank’s Monetary Policy Committee (MPC) still provide a much-needed confidence booster for those buying a home or due to remortgage in the near or mid term.
Indeed, the MPC’s nine members voted five to four in favour of the 0.25% cut – but, of those in the minority, two favoured at 0.5% cut.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “First-time buyers, those with large mortgages that need to be refinanced, and borrowers with heavy debts, are likely to be the most relieved by the potential for easing borrowing costs.”
She added: “Borrowers on tracker mortgages pegged to the base rate will see a more-or-less immediate reduction in their monthly repayment while those locked into expensive fixed-rate deals with multiple months or years left to run must remain patient as their costs will stay the same.
“Borrowers rolling off cheap five and 10-year fixed-rate deals taken out before the BoE began hiking rates are still likely to face an increase in repayments when they eventually refinance, though the rise in costs may now not be as heavy as anticipated.”
Should you move now or wait for rates to fall further?
Mortgage lenders have already been cutting rates in the lead up to today’s decision with many providers now offering deals at rates below 4%.
Competition is certainly heating up but many borrowers and buyers may be considering holding off on their remortgaging or buying plans in case rates fall further.
It’s a tricky decision to make, but anyone grappling with this conundrum is urged to speak to an adviser.
Most mortgage experts we spoke to thought waiting, however, would not necessarily pay off.
Kevin Roberts, managing director of L&G’s Mortgage Services said: “If you are looking to buy, or remortgage, now is a great time to consult with a mortgage broker to take advantage of this opportunity.
“We’ve already seen many lenders reduce their rates, and competition between providers will bring more tailored products to the market.”
Indeed, once you start the process, a good broker will make sure you are able to get the best rate on the market.
Nicolas Mendes, mortgage technical manager at John Charcol, said fixed rates were likely to fall further this year but still did not advise borrowers hung around to wait.
He said: “Fixed mortgage rates are expected to continue their gradual decline throughout 2025. Swap rates, which heavily influence fixed-rate pricing, have eased in recent months, and increased competition among lenders is helping to push pricing down further.
“By the end of the year, we could see leading two-year fixed rates settle around 3.5 percent, with five-year fixes close behind at approximately 3.6 percent, particularly for borrowers with a deposit of 40% or more.
“That said, substantial drops are unlikely unless the Bank of England base rate falls significantly to around 2.5%, which is not currently forecast.
“Without that kind of move, fixed-rate reductions will likely be modest and gradual, rather than sharp or sudden. As a result, borrowers should not wait for rates to collapse but rather focus on securing good value based on their individual needs and timing.”
