The Bank of England (BOE) Monetary Policy Committee (MPC) took the decision in September not to raise the UK's base rate any further, and therefore it remains at 5.25%.
The MPC's decision followed recent inflation data, which revealed that the CPI had reduced to 6.7% in August. However, the base rate is expected to remain high for now, with some experts feeling that reductions won't begin until at least mid 2024.
Unless inflation falls faster than currently forecast, it could take even longer for any reductions to the base rate to be announced - with some economists expecting it to remain at it's current level for a year or more.
Are rates falling?
Even before the base rate announcement, we've seen lenders slash their fixed rates over the past few weeks, in what looks to be becoming a much more competitive market than we've seen in recent months. This is mainly due to falls in swap rates, which are used to price fixed-rate deals.
Here are some of the notable rate cuts for this week so far:
NatWest - announced further cuts on selected residential fixed and tracker deals by up to 0.2% and fixed and tracker buy-to-let deals by up to 0.31%.
State Bank Of India - announced a very surprising 3.9% two-year fixed-rate deal for new buy-to-let customers.
Virgin Money - launched broker-only residential and buy-to-let fixes with sub 5% interest rates.
Accord Mortgages - and a few other lenders have also announced rate changes will be made later today, likely following the base rate announcement.
Is it time to fix?
As always, it depends on your circumstances and whether a fixed-rate mortgage is the best option for you. Of course, it also helps if you're within that key six month window of your current deal's end date. During this period you can sign up for a new rate now, but are not bound to the deal until your existing one ends.
According to UK Finance around 800,000 fixed-rate deals are ending in the latter half of 2023, and 1.6m in 2024. The majority of these customers will be coming off of fixed-rates that were taken out when the base rate was much lower.
However, there's more competition in the market now then we've seen for some time, with some lenders easing rates below the 5% threshold. It could therefore very well be a good time to lock in a new rate. The average SVR (standard variable rate) as at time of writing is still high, at 8.69%, so you'll probably want to avoid falling onto this if you're able to secure a more competitive fixed-rate deal.
What about variable rates?
If economists prove to be correct and we've seen the last increase in
the base rate for now, it
may be worth staying put. The average tracker is still lower than equivalent fixed and variable deals, at 5.94% for 75% LTV - so it may be best to wait until fixed-rates fall further.
What to do if you're struggling to pay your mortgage?
While rates are beginning to come down, many homeowners were thrown into disarray by 14 consecutive base rate increases.
If you're struggling with your repayments, speak to your lender at your earliest convenience. The Mortgage Charter, which was introduced back in June of 2023, compels lenders to assist their struggling customers, so don't be afraid to ask for help.
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