Find out what this latest interest rate cut means for your mortgage, the property market and the economy.
The Bank of England’s Monetary Policy Committee has voted to reduce the base rate from 4.25% to 4%. This move was widely expected, but it’s still a positive sign that confidence continues to return to the property market. This latest reduction marks the fifth interest rate cut in the past 12 months. The base rate is now at its lowest level in over two years.
Why the base rate has gone down
Despite ongoing inflationary pressures, we have a sluggish but growing economy, and we’re not in a recession. The UK is facing rising taxes, global economic headwinds and stubbornly high food prices, plus higher wages.
Inflation is expected to remain above target, hovering around 3.5-4% for the rest of the year. Food price inflation could reach 5%.
However, wage growth is cooling in the private sector, moving closer to sustainable levels, which supports the case for lower rates.
What does the reduction mean for your mortgage?
• If you have a fixed-rate mortgage – Your monthly payments stay the same until your fixed term ends.
• On a standard variable rate deal – Your payments may come down, depending on whether your lender passes on the reduction.
• Tracker mortgage – Your payments will reduce, as they move in line with the base rate.
Lenders have already cut mortgage rates
If you’re looking for a new mortgage or know someone who is, you might be hoping for better deals after today’s good news. However, most lenders had already anticipated the base rate cut and priced it into their offers. This latest reduction won’t necessarily impact available rates.
That said, the trend is encouraging. Many banks have already started lowering their rates, including Santander, Halifax, Barclays, Accord, Coventry, Fleet Mortgages and TSB.
The property market is showing signs of growth
And there’s more good news. We’ve seen increases in house prices. Halifax announced on 7 August that house prices went up in July by 0.4% – the highest since the start of the year. The average property price is now £298,237, compared to £297,157 in June.
While the increases aren’t dramatic, they show that confidence is returning, which is good news for homeowners and buyers.
If you have any questions about your mortgage or upcoming plans, feel free to get in touch. We’re here to help.