The Bank of England’s base rate announcement today will no doubt be music to the ears of house hunters on the lookout for home loans but it would naive to expect a record-breaking flurry of mortgage applications as a result, expert David Ingram says.
Today has been dubbed Super Thursday, as the Bank bundled three key announcements in one day for the first time ever. The base rate decision, the minutes from the Monetary Policy Committee’s meeting and the Bank’s inflation report were all released today, while previously the Bank spread them over a period of two weeks.
The Bank of England has decided to keep the base rate unchanged at 0.5 per cent, the record-low level that was set more than six years ago. The Committee voted 8-1 to keep the existing rate.
Borrowers should not get carried away
While Ingram believes the Committee’s decision could prompt more homebuyers to take on a fixed-rate mortgage, he doubts the number of new applications would soar.
Ingram, who is the founder of MyLocalMortgage.co.uk – a web platform that enables people to find mortgage advisers in their local area, explains why mortgage applicants should not get carried away by today’s interest rate decision:
“There appears to have been a rise in the number of mortgage applications of late, and the fact that national interest rates are to remain at an historic low could prompt more buyers to jump on the fixed-rate mortgage bandwagon,” he commented.
“It was widely predicted that the cash rate would rise this time around, and this understandably forced many lenders to be a tad more conservative with their mortgage packages. While there are still some attractive deals out there for buyers, it’s safe to assume that many mortgage providers will already be thinking ahead and playing things cautiously, as it’s surely only a matter of time before the cash rate rises again.”
Buyers cannot afford to rush things
While many mortgage applicants will see this as an opportunity to secure a low fixed-rate term before the cash rate inevitably goes up in 2016, Ingram warns that property buyers cannot afford to rush things.
“The national cash rate is important, as this is the rate at which the BoE will lend to banks, but it’s not the be all and end all,” he added.
“High street banks will only use this as a guide, and it’s vital that applicants remember that the national cash rate and actual mortgage rates are very different. It’s easy to get stung as you attempt to win the race against rising nationwide interest rates, and fixed-term mortgage holders are often unaware of the hidden costs involved.
“You could argue that general public awareness of UK interest rates has risen over the past decade or so, but there’s still a worrying lack of knowledge when it comes to the nuances of different mortgage packages. This is why expert mortgage advisers will continue to earn their corn for the foreseeable future.”
