Great news for mortgage seekers! The Bank of England has just announced that it will maintain interest rates at 5.25%, providing a moment of respite. While this decision aligns with market expectations, there’s a subtle suggestion that the era of significantly reduced home loan costs might not be just around the corner.
Despite widespread anticipation of rate cuts in the coming year, for the second consecutive month, three out of nine members of the Bank’s Monetary Policy Committee voted for an increase. The central bank emphasizes its readiness to take action against inflation, potentially impacting the future affordability of mortgages—information crucial for our mortgage-seeking clients.
Beyond market expectations, our clients need to consider lenders’ eagerness to compete, a factor influenced by the housing market outlook. Signs of a resurgence in demand are apparent, with surveyors noting a rebound to April 2022 levels. As a mortgage broker, this information is crucial for guiding our clients through the evolving landscape.
This potential uptick in housing market activity may lead to increased lender confidence and, consequently, further reductions in rates as they vie for business. As mortgage brokers, we are well-placed to leverage this competition for the benefit of our clients.
For existing borrowers nearing the end of a fixed-rate deal, the prospect of waiting for lower rates might seem appealing. However, given the current consensus ruling out a return to basement-level interest rates and the possibility that we are close to the bottom of the current curve, our expertise guides clients in making informed decisions. Waiting could result in losses incurred through paying the lender’s standard variable rate (SVR) in the interim, especially as SVRs have surged alongside the base rate.
SVRs now average 8.19%, with some exceeding this figure. We can advise our clients that sticking to the SVR may not be a prudent choice when fixed rates are available at significantly lower costs.
Considering that many lenders offer the option to fix several months before the end of a deal, our role as mortgage brokers involves strategically securing a fixed rate. This becomes even more crucial if rates fall below 4%, serving as a wise move for our clients as a hedge against inflation. In the event of further rate cuts, we can help clients potentially move ahead of the loan start date, and if not, guide them in weathering any subsequent rate increases.