The Bank of England has announced that the current base rate will remain unchanged at 5.25%. With a slight rise in inflation, it's evident that the Bank of England is probably holding on for now instead of outwardly dropping the rate.
Now, whilst the BoE base rate does influence the mortgage products provided by high-street lenders, another factor is at play this time in the mortgage world.
Banks have to lend to make money.
A simple statement, but well worth noting this time around.
A trend of mortgage cuts across the board has been ongoing for several months, a sort of "rate competition" totally encouraged by the Bank of England's decision to hold the rate at 5.25%.
During the first week of January, major lender HSBC announced a series of mortgage cuts, one being the first mortgage product under 4% (3.94% for a five-year deal at 60% loan-to-value with £999 fee).
Since then, most banks have followed suit in an attempt to position themselves at the favourable end for our UK buyers. There has been a surge of mortgage cuts across major lenders simply because they're all competing against eachother for your business.
So, if you're a homeowner looking to buy or remortgage, breathe a sigh of relief because you're in a far better position then you were last summer.
Could mortgage rates fall further still?
No one has a crystal ball, so whilst we can't totally say yes, we can admit it looks promising. The Bank of England's base rate is directly impacted by inflation, so in simple terms, if inflation lowers, so will the base rate.
Now, the market predicts that we will see a base rate decrease once we're closer to the inflation target of 2%. As of the 17th of January 2024, the current inflation rate stands at 4.2%; given the rate in October 2023 was 5.6%, we are in a good position.
The market expects that if inflation continues on this path, we'll see base rate cuts around May- June 2024. Once that cut happens, we expect the banks to follow suit and continue to reduce their mortgage products.
It's time to check in with your bank.
Something that our Lettings & Sales Director Spencer flagged last week.
With the ongoing cuts in rates and inflation steadily lowering, take the opportunity to phone your bank and see what they can offer you. In one phone call, Spencer changed from a tracker mortgage above 5% to a 5-year fixed at 3.8%.
Now, whilst that may put him in a position where he is paying a little more if mortgage rates come down, at least he can forecast his net position for the next five years.
In conclusion, the mortgage market is most definitely moving in the right direction for our UK homeowners. It's important as a buyer to recognise your position in the current market; there are products out there for you, and there are banks offering record rates.
While the Bank of England base rate is super important to keep an eye on to somewhat predict which direction rates will go, there is a whole other factor to focus on: the intense high-street lender competition.
So, if you're a homeowner looking to buy or remortgage because the banks are so keen to lend, this is your opportunity to take advantage of the current rate race.
