Bank of England Base Rate and Mortgage Rates – What’s happening right now?
The Bank of England base rate remained at 5.25% in February. How will this affect mortgage borrowers? Will mortgage rates continue to fall? Here, the Mortgage Advice Bureau give us their expert opinion.
The Bank of England base rate remained at 5.25% in February after the Monetary Policy Committee (MPC) decided by a 6 to 3 majority in favour of extending the pause in interest rates. That vote marked the fourth consecutive time the base rate has gone unchanged and follows an unexpected uptick in December’s inflation figures.
How will this affect mortgage borrowers?
Although borrowers may have preferred to see a cut to the base rate, they can be reassured that mortgage rates are already experiencing a downwards trajectory. The average rate charged on a two and five-year fixed mortgage fell more than one percentage point over the past six months, to stand at 5.56% and 5.18%, respectively, today. Remember, this is the average rate, not the market leading rates which currently sit at 3.8% and 4.1% respectively.
While some may find these rates higher than the last time they locked into a fixed deal, they are perhaps a more attractive option than being transferred to a lender’s ‘reversion’ rate, with the average Standard Variable Rate (SVR) currently sitting at 8.17%. At this rate, monthly repayments would be approximately £1,566 based on a £200,000 mortgage over a 25-year term, compared to £1,235 per month at the average two-year fixed rate. “The recent volatility surrounding fixed mortgage rates may make it more pressing for borrowers to secure a new deal as soon as possible,” said James King, Managing Director of MAB Kent Ltd. “Lenders can pull deals if they have an influx of applications, and a volatile swap rate market can put pressure on pricing where margins are already tight.”
Will mortgage rates continue to fall?
It would be inevitable to see a mix of both fixed rate rises and cuts over 2024. Lenders will need to juggle consumer demand, their own targets and future base rate expectations when considering pricing. However, Oliver Dack, Spokesperson for Mortgage Advice Bureau, urged consumers not to be too preoccupied with base rate headlines and to instead focus on what options best suit their needs and circumstances. “We are seeing some really competitive rates being offered by lenders that are undercutting the Bank of England base rate by some margin,” said Dack. “Clients are finding borrowing cheaper than six months ago, and as a result we’ve seen an increased appetite for people wanting to move home.”
As for borrowers who are not looking to move, Dack proposed speaking with an adviser at least six months in advance of their current product ending, in order to be best prepared for finding a new deal. “We are constantly monitoring rates and, while the base rate hasn’t changed, the mortgage market has seen better product options become available which many clients have been able to take advantage of before their current deal ends,”
Borrowers concerned about their existing mortgage or looking for a new deal would be wise to seek advice from a broker as soon as possible!
