The past 2 years have seen mortgage rates spiral with an unstable inflation rate keeping rates high. Back in December last year we saw a plateau, as the base rate was held at 5.25% and in fact, this was the third time in a row the Bank of England held the base rate at this level.
On the 1st of February, we saw another Bank of England base rate meeting and I’m sure homeowners across the UK held their breath to see where the base rates would go and in turn, what this meant for their mortgage. Below is the latest on that meeting and what it could mean for homeowners in the UK.
What’s the Latest Update on Interest Rates?
For the fourth consecutive time, the bank has opted to freeze the base rate at 5.25%, a 15-year high and a bid to push rising prices out of the UK economy. This decision has come after inflation unexpectedly rose slightly to 4% in December and after officials at the bank were accused of acting too slowly in tackling inflation when it rose to double digits in 2022, they are keen to ensure the danger has passed before cutting rates.
It has been forecast that inflation will fall to its target of 2% by the second quarter of this year, which will in turn push interest rates down and ultimately determine the cost of borrowing money. However, the Bank isn’t letting us rest on our laurels, this drop in inflation has been said to only be temporary and that it is likely to rise again in the following months. After this, it will take until the fourth quarter of 2026 for inflation to remain consistently at 2%, a year later than previously forecast.
How is the Market Adjusting to the Bank Rate Stasis?
Despite the current hold on interest rates at 5.25%, several banks and building societies have increased their fixed-rate deals very slightly. Nationwide has increased its rates for new borrowers by up to 0.3 percentage points from 2nd February, with its 2-year remortgage rate starting from 4.45% with a £1,499 fee, and the same for the 5-year starting at 3.94%, at 60% LTV. For first-time buyers, deals at a 90% LTV are from 5% for a 2-year fixed deal or 4.55% for a 5-year, both with a £999 fee.
Virgin Money is also responsible for a slight increase at the news of the current plateau. Its best current 2-year fixed starts at 4.64% and 5-year at 4.19%, both with a 60% LTV and £995 fee. Virgin Money has also released a new fee-free 2-year fixed deal with just a 5% cash deposit, at 5.49% and offers £500 cashback on completion.
What Does This Mean for Your Mortgage?
With inflation plateauing and speculation around when the drop to the targeted 2% will happen and the longevity of that figure, it is still too soon to be definitively cutting interest rates. The numbers are moving in the right direction however, albeit with a lengthy pause in stasis, but there are planned rate cuts to go ahead this year, which can hopefully mean homeowners and prospective homeowners can breathe a sigh of relief.
For homeowners on fixed-rate mortgages 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 day, can be changed if a better deal becomes available. For those on tracker or variable mortgages, your rates will at present, stay the same, as the interest rate remains at 5.25% for the fourth time in a row.
What to do if you're on a Fixed Rate
As mentioned previously, some lenders have cut their prices since the last Bank of England update and others have started to increase since the 1st of Feb, it’s highly advisable to find the best deal for you right now and lock in as early as you can. Most mortgage holders in the UK are on fixed-rate deals so what you should do when your term ends will depend on the following:
- Locking In – if your current deal is ending in the next 6 months it could be wise to lock in a fixed deal now to give you insurance against any further rate rises. This option also allows you to switch to a cheaper deal if one launches before your current rate finishes.
- Trackers – if your current deal is ending soon you may want to consider a tracker, even if temporarily. You could get a tracker that doesn’t come with early repayment charges, then if rates come down, you can move onto a fixed deal, penalty-free at your time of choosing. A side note to trackers is that, even though the base rate is not expected to rise above 5.75%, there are no guarantees, and as trackers follow the base rate, you will have to pay the extra if the rate rises.
- Lenders Standard Variable – with an SVR, the interest you pay can change at any time, which means that they are far more expensive right now due to the continuous rise of the base rate. Switching to a fixed deal can provide price certainty, however, if you are waiting for fixed rates to drop, you could opt for an SVR in the meantime without an early repayment charge, and switch to a better fixed-rate deal later.
Speak to Your Trusted Mortgage Advisor in Manchester
If you want more information on how this plateau of the base rate could impact you and your mortgage prospects, speaking to our friendly team at TaylorMade, a specialist mortgage broker in Manchester, could be the perfect solution.
Taylormade is 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. It can be overwhelming trying to make the right decision on your own, searching for the best deal for you and your family, this is where TaylorMade can help.
Contact us today, TaylorMade, your expert mortgage broker in Manchester.
