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Bank of England Update: UK Inflation Moving in the Right Direction for Rate Cuts

LATEST NEWS | 21.03.2024

What the Bank of England’s latest update means for your mortgage rate

Consumer prices have increased by more than 21% since the end of 2020 and since then, the UK has retained one of the highest rates of headline inflation among the Group of Seven advanced economies. Today, it would seem we are definitely moving in the right direction with UK inflation, with another drop in February this year, from 4.0% to 3.4%. Excellent news for those of us hard hit by the rising cost of living and for those wanting to hop onto the property ladder, move house, or make a property investment, this can only be good news, right?  

What is the Latest Update on Interest Rates?

The Bank of England thinks that inflation will fall back to the central bank’s 2% target in the coming months and while inflation rates are far better than they were this time last year, many would think that yesterday’s Bank of England meeting meant a drop in interest rates for the UK property market, however, this hasn’t entirely transpired. Interest rates have been held for a fifth time at 5.25%, however, yesterday was the first time since September 2021 that no one voted for a rate increase. From this, money markets have predicted a three-quarter of a percentage point reduction in borrowing costs by the end of the year.  

Is the Bank of England Being Overly Cautious?

The Bank has received some backlash for being overly cautious. Julian Jessop of the Institute of Economic Affairs think tank, said the decision was “disappointing” but welcomes hints that cuts are “coming soon”. He also said, “The big picture is still that monetary policy is too tight and the Bank has been too slow to cut rates. Nonetheless, the shift in tone today is important”. The steep decline in inflation this month should have us all breathing a final sigh of relief, but it seems the Bank wants to keep our guards up for a little longer, which could potentially cost the UK economy opportunities for growth.  

How Will This Affect Mortgage Rates?

Despite the hold on interest rates, mortgage rate cuts are looking likely by summer. This week’s lower inflation figure has sparked a positive reaction within the property market and NatWest was quick to cut its 5-year fixed rate deals for purchase and remortgage by 0.05% to 4.19% with a £1,495 fee (specifically for borrowers with at least a 40% cash deposit). However, there has been a slight rise in mortgage rates over the past 6 weeks but the pressure on lenders to increase seems to have dissipated. The general consensus is that mortgage rates have settled, albeit temporarily, but some lenders are still making marginal increases to reflect the slow movement from the Bank.  

Taylormade: Your Trusted Mortgage Advisor in Manchester has your back.

For homeowners on fixed-rate mortgage deals coming to an end this year, we urgently ask you to do your research and get the ball rolling on securing a deal. Most lenders will offer you a deal 6 months in advance which by the time it comes to switch over, can be changed if a better deal becomes available. For those on tracker or variable mortgages, your rates will at present, stay the same. This is where Taylormade comes in. We are a dedicated, professional, and independent mortgage advisor in Manchester, with access to the best mortgage rates on the market today. We understand the financial difficulties facing everyone right now, and our friendly, helpful advice could be just the solution you need.  Contact us today, TaylorMade, your expert mortgage broker in Manchester.
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