The BoE base rate has remained at 5.25%

The current base rate remains at 5.25%

The Monetary Policy Committee (MPC) has voted to keep the Bank of England (BoE) base rate at 5.25% again. The rate first reached this level in August 2023, following 14 rate consecutive increases since December 2021. This is now the fourth time that the rate has been held at 5.25% since reaching that point in August.

How long is the BoE base rate expected to stay at 5.25%?

Inflation has been gradually decreasing but the Bank of England has been clear that it’s too soon to consider reducing the base rate at this stage. The annual inflation rate in December 2023 was 4%, an increase from November’s rate of 3.9%. While considerably better than the high rate of 11.1% in October 2022, this is still double the Bank of England’s target of 2%. As such, the base rate needs to remain high to force inflation down even further. In fact, despite the reduced inflation rate in recent months, the Bank of England has warned that it hasn’t ruled out further interest rate increases if inflation persists.

Other financial experts, however, are more optimistic and believe that interest rates will start to come down in the near future. Deutsche Bank, Investec and the Oxford Economics consultancy have predicted that the Consumer Prices Index (CPI) will drop to under 2% within 4 months. Market predictions are now pointing towards the first interest rate cut happening as early as April or May. This will be welcome news to borrowers with tracker mortgages or other variable rate mortgages. Other experts agree that the cuts will start earlier than originally predicted but are leaning more towards June or July.

How have mortgage rates been affected?

As a result of the falling inflation rate, mortgage lenders have been reducing their rates in recent months. New deals have been released to encourage more borrowers as a competitive edge has emerged once more between lenders.

Unfortunately, these lower rates are still considerably higher than the fixed rates borrowers currently have for deals that are coming to an end. An estimated 1.6 million fixed-rate deals will end in 2024. As mortgage rates stand at the moment, the deals that borrowers remortgage to will be a lot more expensive. If inflation continues to drop, however, better deals should emerge soon because lenders base their rates on market predictions.

What action can you take now?

If your fixed-rate deal is coming to an end in the next 6 months, speak with our mortgage brokers as soon as possible. They can help you to lock in a new rate without incurring an early repayment charge. This rate will start when your current one ends but they will also notify you if a better deal becomes available in the meantime. They can also advise you on the alternatives to a fixed-rate deal that you may prefer, depending on your situation. For example, a tracker mortgage tracks the BoE base rate with a percentage added on top. As the base rate is expected to come down in the near future, this may be a good option. Or you may prefer the flexibility of an offset mortgage.

If you have a tracker mortgage or other variable rate mortgage and want to find out if better options are available, just give us a call on 01322 907 000. Our mortgage brokers can check your current deal and situation before searching for alternatives that may suit you better.