Despite falling inflation the decision makers at the central bank, the Monetary Policy Committee (MPC), voted 8-1 in favour of freezing the base rate.
The one member who voted against no change wanted to reduce interest rates by 0.25% to 5%.
And whilst they were in the minority on this occasion, forecasts suggest they may have more members sharing their view in June when the long-awaited base rate cut is predicted to take place.
Hannah Bashford, director at Model Financial Solutions, speaking via the Newspage Agency, said: “The base rate has been held again which is disappointing, but to be expected.
“What is great news is that this is the first time there have been no votes to raise the base rate, which is a good indication that we are edging closer to where we need to be to cut interest rates and give UK households the help they need.”
How will the base rate freeze impact your mortgage?
Today’s decision will come as another blow to borrowers – but there are some who will feel the effects more than others.
If you are on a fixed rate with a year or more to run, you will not see any change. Tracker mortgage customers will also see no change.
It is those homeowners who are due to renew their mortgage deal in the next few months and also those about to buy a home who will be most impacted by today’s decision.
Sarah Pennells, consumer finance specialist at Royal London, explained: “The fact that rates haven’t fallen could make it harder for those homeowners who are looking to remortgage as well as those buying a property.
“There are over a million homeowners whose fixed rate deal will end this year; with the vast majority on interest rates below 2.5%.
“Royal London’s cost of living research shows that people were paying over £300 more in housing costs this February compared to a year ago. Fixed rate deals have been rising again in recent weeks but are expected to fall again later this year.
“Whichever option they choose, it’s likely to be cheaper, possibly much cheaper, than their mortgage lender’s standard variable rate (SVR).
“This is where advice from an impartial mortgage adviser can be invaluable. They can weigh up the pros and cons of opting for a shorter fixed rate, or a tracker deal, against committing to a longer fix.”
How high are mortgage rates at the moment?
A typical two-year fixed rate mortgage has fallen from 6.70% to 5.76% since September 2023, according to Moneyfacts.co.uk.
Meanwhile, the average five-year fixed rate has fallen from 6.19% to 5.34%. But these average rates have, however, risen from 5.56% and 5.18% respectively since last month.
As Pennells pointed out, the average standard variable rate (SVR) is much higher. It currently stands at 8.18%, up from 8.09% in September 2023, according to Moneyfacts. The rate has risen slightly from 8.17% since the start of February 2024.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers worried about securing a new deal would be wise to seek advice from an independent broker, and any existing customers should speak to their lender immediately if they are struggling with repayments.
“Those coming off a fixed rate deal will find the average SVR stands above 8%, so it’s much higher than the average two-year fixed rate. A typical mortgage being charged the current average SVR of 8.18% would be paying around £308 more per month, compared to a typical two-year fixed rate (5.76%).
“First-time buyers with limited deposits would be wise to seek advice in the first instance when looking for a mortgage, but their biggest hurdle to become a homeowner is finding an appropriate property while affordable housing remains in short supply.”
