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Published on : March 25, 2024 12:25

Bank of England Base Rate Held at 5.25% – What Does This Mean for Mortgages?

The Bank of England (BoE) has announced that it will hold its base rate at 5.25% for a fifth consecutive month. The Monetary Committee voted with a majority of eight to one to leave rates unchanged at their current level. While this isn’t the fall that many were hoping for, there are positive signs that “things are moving in the right direction” according to Andrew Bailey, head of the Bank of England. 

As the BoE works to meet the government’s target of 2% inflation, it is continuing to use base rates as a way of controlling spending. Higher interest rates mean that there is less money to be spent within the UK economy. When spending slows, price increases also slow, which helps to bring down the inflation rate. 

The Consumer Prices Index (CPI) currently tracks inflation at 3.4%. This is the lowest inflation rate since September 2021 but still some way from the Bank’s target. 

How Will This Impact Mortgages?

The base rate impacts the UK economy in several ways, with higher rates meaning that it costs more for lenders to borrow from the central bank. This then ‘trickles’ down to banking customers who will find that it can cost them more to borrow and that they earn less on their savings.    

Interest rates first reached 5.25% in August 2023, following 14 successive increases since December 2021. At the start of December 2021, the base rate was 0.1% with an average mortgage rate of 2.95% on a five-year fixed agreement. 

A combination of global factors has contributed to a surge in food and energy prices. At the same time, a drop in people available to work after the COVID-19 pandemic also fueled so-called ‘cost-push’ inflation. This led to a peak interest rate of 11.1% in October 2021, with average mortgage rates for a five-year deal reaching more than 6% over the following years.

Today the average rate for a five-year fixed-rate mortgage deal is 4.74% (According to Rightmove as of March 20th 2024. Based on a 75% Loan to Value – LTV). 

While current mortgage rates are not at the historic lows of around 3.59% that were available during September 2021, it is important to remember that current rates are still highly affordable when compared to what homeowners were paying decades ago. 

Homeowners also have access to a greater range of mortgage products than at any other time, with varying options available depending on your circumstances. 

However, having so many mortgage products available can make it difficult to find the best deal. Whether you are a first-time buyer or have a fixed-term arrangement due to end soon, talking to a mortgage advisor can help you decide on the right mortgage.

Talk to an advisor today – It’s free!  

Fixed-Rate Mortgages

If you are currently on a fixed-rate mortgage, you will not see any changes to your monthly mortgage repayments. However, nearly 40% of current fixed mortgage deals are due to end before 2025. Many of these products have rates that are below 2%, so if your current mortgage is due to end this year it’s worth speaking to a mortgage advisor sooner rather than later to secure a competitive rate. 

Tracker Mortgages

Borrowers with a mortgage that ‘tracks’ base rates will also not see an imminent increase in their monthly repayments with the rate remaining at 5.25%. However, like borrowers with a fixed-rate mortgage, if your current deal is set to end soon it’s worth speaking to a mortgage broker to avoid transferring to your lender’s standard variable rate (SVR). 

 Standard Variable Rate Mortgage

If your mortgage is tied to a standard variable rate, you’ll already be aware that these can change at the lender’s discretion. SVRs are typically higher than tracker of fixed mortgage rates and can typically be around 7.5% and 8.5%.

Most borrowers on an SVR are moved onto this kind of mortgage after the previous fixed-term or tracker arrangement has come to an end. If you are currently on an SVR and want to check to see if you can save money by switching to a new mortgage product, it’s worth speaking to a mortgage advisor for the best advice regarding your current circumstances. 

Talk to an advisor today – It’s free!      

Edward Mellor has been pairing clients with their perfect mortgage for over 30 years, by comparing rates from over 50 lenders. 

If you would like to speak to a mortgage advisor, simply book a mortgage appointment using the form here

Related Pages

Mortgages | March 2024 Budget | Tips for First-Time Buyers 


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