The Bank of England has today announced that it will be cutting interest rates by 0.25%, taking the base rate from 4.75% to 4.5% in the first decision of the year. This will be the third time in under a year that the Bank of England have decided to reduce interest rates.
How does this effect mortgages?
Changes to the Bank’s Base Rate can influence how much interest you’ll pay on loans, including mortgages. In recent weeks there has been slight increases in mortgage rates, despite some lenders cutting rates across mortgage products. However, in the past week, the average rate for a 2-year fixed rate mortgage has fallen by 0.02% to 5% compared to a week ago, while the average rate 5-year fixed rate is now 4.79%.
If your mortgage is on a fixed-rate deal, your monthly payments won’t change until the end of your deal. However, if you’re on a tracker mortgage, or a variable rate mortgage that follows Base Rate changes, this month’s Base Rate reduction will mean your monthly payments will reduce.
This reduction is perfect timing for those coming to the end of their fixed-rate mortgage and for first time buyers looking to get onto the property ladder.
The Bank of England’s Monetary Policy Committee meets every six weeks to discuss and vote on whether interest rates should go up or down, or stay the same. The next decision on interest rates will be announced at midday on 20 March
Rightmove’s mortgage expert, Matt Smith, says: “With the early promising signs of home-mover activity we’ve been seeing since the start of this year, the outlook for borrowers remains stable.
While we’ve seen some mortgage rates rise in recent weeks, these have been mostly in the higher and lower loan-to-value ranges, and average mortgage rates are still below where they were when they spiked in January.
Some of the major lenders have cut rates in recent days, and if the Base Rate continues to follow the expected downward trajectory in 2025, there will be some headroom for lenders to continue to slowly reduce their pricing. The UK mortgage market remains competitive, but headline rates will continue to be impacted by events both in the UK and overseas,”
If you’re a first-time buyer, outgrown your current home or looking to downsize, get in touch with your local Kivells team today for expert advice.