The Bank of England has made a significant move by cutting its base rate from 5% to 4.75%. This decision, although widely expected, marks the second reduction in interest rates this year, following a similar cut earlier in the year. The decrease is a part of the Bank’s ongoing efforts to manage inflation and stimulate economic growth.
For many homeowners, this rate cut will have an immediate effect on mortgage payments, particularly for those with variable-rate or tracker mortgages. Hundreds of thousands of borrowers across the country will see their monthly repayments reduced, providing some relief amidst the ongoing cost-of-living challenges.
Around 600,000 mortgage holders in the UK have tracker mortgages, which are directly linked to the Bank of England’s base rate. This means that when the Bank of England adjusts its rate, borrowers with these deals will see their mortgage rates move in direct response. This provides a certain level of predictability and transparency, allowing borrowers to anticipate changes in their payments as soon as the central bank makes its decision.
In addition to those on tracker deals, a similar number of homeowners are on variable-rate mortgages. These borrowers won’t necessarily see an immediate change, as their rates depend on the specific terms set by their lender. It’s likely that these lenders will take some time to decide how they will adjust their rates, if at all, based on the Bank of England’s recent move. As a result, there is some uncertainty for those on variable deals, but many will hope for a reduction in their monthly payments as well.
Mark Harris, the chief executive of mortgage broker SPF Private Clients, highlighted the importance of the Bank of England’s decision, noting that it is particularly beneficial for borrowers in the current economic climate. Harris believes that the cut is a positive step, especially considering that inflation has fallen below the Bank’s 2% target. This makes the rate cut more reasonable and justified, and it will likely provide some much-needed relief to households dealing with higher costs.
He added, “This is hugely positive for borrowers, with the Bank of England doing the right thing given the current inflation target. Those on base-rate trackers and variable-rate mortgages should see their monthly payments fall, which will bring much-needed savings. These reductions will be gratefully welcomed by hard-pressed borrowers, many of whom are still navigating the challenges of inflation and high living costs.” The rate cut could be a welcome financial reprieve for many who have been struggling to keep up with mortgage repayments during a difficult economic period.
“While we are witnessing a slight increase in mortgage rates, it is important for existing borrowers to start thinking ahead about their next move. Mortgage rates are constantly fluctuating, and with the possibility of further rises, it’s wise to engage with a whole-of-market mortgage broker approximately six to seven months before the current deal expires. This gives borrowers the chance to secure a new deal before rates climb any higher, providing an element of certainty in an uncertain market.
Locking into a new deal ahead of time can offer peace of mind, particularly if rates are expected to rise. By discussing options with an experienced broker, borrowers can avoid the stress of waiting until the last minute to make decisions. If rates do increase, borrowers will be protected by locking in a deal early. However, should rates fall in the coming months, borrowers have the flexibility to revisit their options.
Mortgage brokers play a crucial role in helping existing borrowers navigate the changing landscape. They can evaluate a range of deals across multiple lenders and provide tailored advice to ensure the best option is chosen. Working with a broker allows borrowers to explore a variety of competitive mortgage products, making it easier to find a deal that suits their financial situation.
For new borrowers and first-time buyers, it is equally important to seek professional guidance. A mortgage broker can help them explore the wide range of schemes available to assist in getting onto the property ladder. These schemes, including government-backed help-to-buy initiatives and other first-time buyer support options, can make a significant difference in securing a home.
Beyond finding the right mortgage product, a broker can also help new borrowers understand how to make themselves as appealing as possible to potential lenders. They can offer advice on improving credit scores, managing finances, and presenting a solid application, which can greatly enhance a borrower’s chances of securing approval from lenders in a competitive market.”
“While we are witnessing a slight increase in mortgage rates, it is important for existing borrowers to start thinking ahead about their next move. Mortgage rates are constantly fluctuating, and with the possibility of further rises, it’s wise to engage with a whole-of-market mortgage broker approximately six to seven months before the current deal expires. This gives borrowers the chance to secure a new deal before rates climb any higher, providing an element of certainty in an uncertain market.
Locking into a new deal ahead of time can offer peace of mind, particularly if rates are expected to rise. By discussing options with an experienced broker, borrowers can avoid the stress of waiting until the last minute to make decisions. If rates do increase, borrowers will be protected by locking in a deal early. However, should rates fall in the coming months, borrowers have the flexibility to revisit their options.
Mortgage brokers play a crucial role in helping existing borrowers navigate the changing landscape. They can evaluate a range of deals across multiple lenders and provide tailored advice to ensure the best option is chosen. Working with a broker allows borrowers to explore a variety of competitive mortgage products, making it easier to find a deal that suits their financial situation.
For new borrowers and first-time buyers, it is equally important to seek professional guidance. A mortgage broker can help them explore the wide range of schemes available to assist in getting onto the property ladder. These schemes, including government-backed help-to-buy initiatives and other first-time buyer support options, can make a significant difference in securing a home.
Beyond finding the right mortgage product, a broker can also help new borrowers understand how to make themselves as appealing as possible to potential lenders. They can offer advice on improving credit scores, managing finances, and presenting a solid application, which can greatly enhance a borrower’s chances of securing approval from lenders in a competitive market.”
“We expect the Monetary Policy Committee (MPC) to maintain its expected trajectory for base rate reductions, with more cuts likely in the coming months. This should provide further relief for homeowners, while making home ownership more achievable for first-time buyers. However, it is important to recognise that while rate cuts are anticipated, the exact levels they will reach and the pace at which this occurs remain uncertain. For those who are risk-averse, particularly if a rise in rates would make it difficult to manage mortgage repayments, a fixed-rate mortgage is often a sensible option to consider.”
Despite the expectations, there remains some uncertainty about whether the anticipated rate cut in December will actually take place.
The Bank of England is set to release its quarterly economic forecast today, which will likely incorporate the potential effects of the recent Budget. This forecast could offer valuable insights into whether the Bank is still planning a rate cut next month, or if those expectations have changed.
The Budget itself introduced a significant hike in the minimum wage, as well as sharp tax increases on employers’ national insurance contributions. These changes are expected to lead to higher inflation in the economy. In the past 24 hours alone, prominent businesses such as JD Wetherspoon, which operates 797 pubs across the country, have warned that the Budget will add an extra £60 million to their costs next year. Similarly, Marks & Spencer has stated that they expect to face a £120 million financial hit due to the new measures.
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