The Bank of England has today decided to cut the base rate to 4.5%.
Commenting on the Bank’s decision, Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
“As widely expected, the Monetary Policy Committee voted to reduce interest rates by a quarter-point to 4.5% at today’s meeting. Members voted by a majority of 7-2 in favour of a 0.25 percentage-point reduction, with two members favouring a 0.5 percentage-point cut.
This is hugely positive for borrowers, with the Bank of England doing the right thing given inflation fell again to 2.5% in December, so closing in on its 2% target. Those on base-rate trackers and variable-rate mortgages should see their monthly payments fall, and those savings will be gratefully welcomed by hard-pressed borrowers.
Those hoping for cheaper rates on new mortgages, particularly fixed rates, may find these take a little longer to filter through. This rate reduction was largely expected by the markets and has therefore been factored into pricing already. However, as long as Swap rates, which underpin the pricing of fixed-rate mortgages, continue to fall we should see lenders price their fixed rates more keenly.
New borrowers and first-time buyers should speak to a broker to run through the various schemes available to help them climb onto the property ladder, as well as how to make themselves as attractive as possible to prospective lenders.
We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, bringing further relief for homeowners and home ownership within the grasp of first-time buyers. However, what cannot be guaranteed is where rates end up, nor the pace it takes to get there. If you cannot afford to be wrong – that is, if rates were to rise you would struggle to pay the mortgage – then a fixed-rate mortgage usually makes sense, and it is always worth seeking the advice of a whole-of-market broker to find out what options are available to you.”
