Interest Rates Reach 5.25%: Implications for Mortgages
In its latest move to combat surging inflation, the Bank of England (BoE) has raised its Base Rate by 0.25%, marking the 14th consecutive increase and pushing interest rates to 5.25%. This rate is the highest seen in 15 years.
In its latest move to combat surging inflation, the Bank of England (BoE) has raised its Base Rate by 0.25%, marking the 14th consecutive increase and pushing interest rates to 5.25%. This rate is the highest seen in 15 years.
The Government has set a 2% inflation target for the Bank, and recently, it was announced that the inflation rate had unexpectedly dropped by 0.8% to 7.9% in the month leading up to June. This positive development has led to a marginal decline in mortgage rates in response to the improved inflation figures.
Lenders anticipated this rate increase and many had already factored this into their current rates
Our mortgage expert, Phil Shearer, comments on the situation: "Lenders have been anticipating the latest rate increase, and it has already been factored into mortgage rates. We can expect mortgage rates to gradually decrease in the coming weeks. The optimistic inflation numbers for June have instilled confidence in the market, suggesting that inflation will continue to fall, and the Base Rate may not rise as much as previously feared. This gives lenders the opportunity to cautiously reduce rates."
Looking ahead, all eyes are now on July's inflation figures, which will be published in a couple of weeks. Positive data could accelerate the rate drops, while any surprises might temper the current market optimism, says Phil.
For current mortgage holders, changes in the Bank's Base Rate can affect the amount of interest they pay on their loans, including mortgages. Those on fixed-rate deals won't see changes in their monthly payments until their deal ends. However, for those on variable or tracker mortgages, a hike in payments is highly likely.
If your fixed-rate mortgage is approaching its end, you may be considering the rates you'll be offered on your next deal. In July, the Mortgage Lenders Charter was launched to assist individuals struggling with their monthly payments and those nearing the end of their fixed-rate terms.
If you are due to remortgage you can secure a new deal up to 6 months before your current deal expires. This can protect you from any rate increases in those six months.
Under the Mortgage Charter, borrowers can secure a new deal up to six months before their current deal expires. Additionally, if available, borrowers can request a better like-for-like deal with their lender up to two weeks before their new term begins.
As for the future, the Bank of England's Monetary Policy Committee meets approximately every six weeks to discuss and vote on interest rate adjustments. Current forecasts suggest that the Base Rate could peak around 5.75% in early 2024 and maintain that level for some time before gradually decreasing in the latter half of the year.
The next decision on interest rates will be announced on 21 September 2023. It remains to be seen how the economic landscape will evolve and impact mortgage rates in the coming months.
If you are currently thinking about moving or remortgaging and are concerned how the increases in interest rates could impact you please reach out to Phil, the Love Homes mortgage expert on 01525 713111 or email phil@lovehomes.uk.