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Bank of England Base Rate holds at 5.25%

The Bank of England’s Monetary Policy Committee (MPC) has decided to hold the UK’s base interest rate at 5.25% for the 7th consecutive time. This will be disappointing news for Rishi Sunak’s Conservative government, with no interest rate cut ahead of the upcoming general election (4th July 2024).

Inflation fell to the target figure of 2% in May, but this wasn’t enough to trigger a cut in the BoE Base Rate yet. It is possible that the Base Rate could be reduced at the next MPC meeting (1st August), or the following meeting (19th September), though this isn’t guaranteed.

Mortgage lenders use the UK’s base interest rate to set their Standard Variable Rates (SVR), and this affects how much borrowers on a variable or tracker rate mortgage will repay each month.

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1 Minute Mortgage – Bank of England Base Rate holds at 5.25%

The Bank of England has chosen to hold the UK base rate of interest at 5.25% for the 7th time within the last 12 months. Most economic experts expected this would be the outcome of yesterday’s vote, and our mortgage experts published an article earlier this week which also predicted this result.

  • While the base rate hasn’t increased, there can’t be any significant changes to mortgage interest rates until the Bank of England announces a cut to the UK’s base rate of interest.
  • A report from The Telegraph noted that millions of UK homeowners (variable-rate mortgages) will pay up to £1,000 more this year, due to the BoE’s ‘cautious’ approach to reducing the base rate.
  • Fixed mortgages have increased slightly over the last few months, as lenders haven’t seen as many cuts to the BoE base rate as expected so far this year.
  • If you are concerned about your mortgage repayments, it can be useful to speak to a qualified mortgage broker for proper advice and support.

Following yesterday’s announcement from the Bank of England, many economic experts are speculating about whether the Bank of England Base Rate (BBR) will be cut at the next vote. This will all depend on whether inflation increases again this month, as the UK has finally reached the ideal target of 2% in May.

If rates are cut, this won’t happen until later this summer following another Monetary Policy Committee vote. This would be either Thursday 1st August or Thursday 19th September, according to the official Monetary Policy Committee (MPC) calendar.

New mortgages shouldn’t be massively affected by the Bank of England’s announcement, especially for borrowers who are looking for variable rate mortgages. Fixed mortgage rates have increased slightly in recent months, as lenders had expected more cuts to the BoE rate this year.

If you are a current mortgage borrower, you may be concerned about whether the Bank of England’s announcement will impact your monthly repayments. To make things simpler, our mortgage experts have created this breakdown to help you to understand how the Bank of England’s announcement could affect your mortgage:

  1. Fixed rate mortgages: If you’re on a fixed interest rate, the Bank of England base rate won’t have any affect on your monthly repayments.
  2. Tracker mortgages: Your interest rate is directly impacted by the BoE base rate, but shouldn’t change as the base rate has remained the same.
  3. Variable rate mortgages: This will depend on your lender. Lenders generally follow the base rate when setting their Standard Variable Rates, but they could choose to increase or decrease the rate at any time.

If you are on a fixed rate now, it is worth checking which rates are available from a range of lenders if your deal is going to end within the next 4 – 6 months. You can ‘lock in’ your new interest rate before your current deal ends, which can provide financial security if rates were to increase again.

Anyone who is worried about their mortgage repayments should speak to their lender, or get proper advice from a qualified mortgage broker. There are usually various solutions to help you save money on your mortgage, which includes remortgaging or repayment holidays to help you get back on your feet financially.

For free mortgage advice, call our mortgage experts on 0800 009 6559or CLICK HERE.

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How do mortgages work?

A mortgage is a financial agreement between a mortgage borrower and a mortgage lender, commonly a Bank or a Building Society. When you take out a mortgage, you are borrowing money which you have agreed to pay back within a set number of years (your mortgage term).

The way that you repay your mortgage will depend on the type of mortgage that you choose:

  • Repayment mortgage: You will repay your outstanding mortgage balance plus any interest in regular instalments (usually monthly).
  • Interest-only mortgage: You will only repay the interest for your mortgage during your mortgage term, and you will repay the full loan amount at the end of your mortgage.
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What is the UK mortgage rate today?

Currently, the Bank of England Base Rate (BBR) is 5.25% and it has been since August 2023. Most mortgage lenders will base their Standard Variable Rates on the UK’s base rate of interest, and these rates will usually be around 2% to 4% higher than the Bank of England rate.

Will mortgage rates go down in 2024 in the UK?

Mortgage rates in the UK are based on the Bank of England Base Rate (BBR), as well as other factors like inflation and any major economic events. Inflation has dropped to 2.3% in April 2024, and the Bank of England Base Rate has held steady at 5.25%.

This is promising news which could indicate the potential for lenders to reduce mortgage rates towards the end of 2024. While mortgage rates could drop, it is unlikely that they would fall anywhere below 4% until at least 2025/26. This is due to economic predictions that the Bank of England Base rate will remain at 3.5% or higher until mid-2025.

Should I fix for 2 or 5 years?

When applying for a fixed rate mortgage, you have the option of ‘fixing’ your interest rate for a set number of years. Common options for fixed rate mortgage terms include 2 years, 3 years, 5 years, and 10 years. The ‘right’ number of years to fix your mortgage for will be based on your situation and the level of flexibility that you need from your mortgage.

2-year fixed rate mortgages can provide more flexibility, allowing you to easily switch to a new deal if a better rate becomes available within the next 2 years. 5-year fixed-rate mortgages can provide more financial security, especially if average interest rates in the UK increase dramatically.

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