The Monetary Policy Committee (MPC) has voted to hold interest rates at 3.75% at today’s meeting – a move which was widely expected given the Middle East conflict and threat of rising inflation.
The Committee’s nine members voted unanimously to maintain base rate at its existing level, remaining ‘alert to the increased risk of domestic inflationary pressures’. CPI inflation fell to 3% in the year to January from 3.4% in December, above the Bank’s 2%, with February’s reading due next week.
Market expectations for two or three further quarter-point rate cuts this year resulted in a fall in Swap rates, which underpin the pricing of fixed-rate mortgages. Now, with market expectations that those reductions may not happen, and a possibility that rates may even rise at some point, Swaps are extremely volatile and have edged upwards again.
Mortgage repricing has happened in stages, initially in response to the increase in cost of funds and recently as a result of service preservation. The ‘big six’ lenders have attempted to reprice away from the top of the ‘best buys’ but no sooner do they do so, then the next in the table does the same and so on.
Commenting on the base-rate decision, Mark Harris, chief executive of SPF Private Clients, said: “There was very little chance that the Bank of England would cut interest rates this month given the geopolitical outlook and fears about the knock-on impact on inflation.
“While a rate hold is disappointing for borrowers with variable or tracker-rate mortgages who would have seen a further drop in their monthly payments if it was a cut, those on existing fixed-rate mortgages won’t see any change.
“With so much volatility on pricing currently, borrowers should consider taking action and securing a rate now if they will need a mortgage in the next six months. If the situation improves, you may be able to swap to a cheaper rate at that time. If mortgage rates continue to rise, you will be relieved that you acted when you did.”
Those looking to take out a new mortgage or refinance in coming months should plan ahead as much as possible, seeking advice from a whole-of-market broker such as SPF Private Clients. Rates can be booked up to several months before you need them so it’s worth doing this for peace of mind. If rates have fallen by the time you come to take out your mortgage, you should be able to move onto a cheaper deal at that time.
