Base rate paused at 5.25%
Mortgage update following news of a pause in the base rate
Base rate remains at 5.25%
After 14 consecutive increases to the Bank of England Base Rate, the Monetary Policy Committee have today decided to pause at 5.25%. This is mainly due to a very favourable inflation reading for August (released yesterday). The closely watched core Consumer Price Index (CPI) figure came in at 6.2% when the consensus view among forecasters was that it would remain close to the July reading of 6.9%. It’s now clear that we are at or near the end of the interest rate ‘rise cycle’ but markets still price in a chance that there could be one more rise to 5.5% in the coming months.Fixed mortgage rates reducing
Lenders increased their rates dramatically in July when there was panic following unfavourable inflation data which briefly suggested that the base rate might have to go above 6%. Since then, lenders have gradually reduced their fixed rates by around 0.5% but there’s more to come in the following weeks. Lenders benchmark their fixed rate prices against the SONIA swap rate. The table below highlights the price for key 2- & 5-year swap rates which peaked on the 6th of July, but both have since reduced by close to 1.0% and it is for this reason that banks will be able to continue to cut their fixed rates in the coming weeks.| 6th July | Today | Reduction | |
|---|---|---|---|
| 2-Year | 6.08% | 5.09% | 0.99% |
| 5-Year | 5.35% | 4.45% | 0.90% |
Managing your mortgage
With so much volatility in mortgage rates, borrowers remain keen to book a new deal early, typically six months prior to their current product expiring. We’re now in a trend where lenders are reducing their rates regularly, but our clients needn’t worry as we’re constantly monitoring this on their behalf right up to completion to ensure they obtain the lowest possible rate.
It is of course all about the client’s preferences and risk profile. Our job as brokers is simply to listen, provide the options, list the pros and cons of each product so that a client has a well-informed choice to enable them to select the right product for them.
What's happening to house prices?
It’s a mixed picture in different markets. At the lower end there’s support because rental prices have rocketed, so even with high mortgage rates it’s often cheaper to buy than rent. At the higher end it’s a lot tougher as the high mortgage rates have significantly reduced demand, and we’re finding that many people want to move but are putting things on hold until mortgage rates reduce. Currently, there are clear opportunities to purchase properties at a discount perhaps up to 10% below the summer 2022 peak, so buyers must weigh up whether that’s enough for them relative to the higher mortgage payments. One thing’s for sure, if mortgage rates do continue to fall then the current discounts available will reduce as buyers who’ve put things on hold will return to the market at the same time and compete for the best properties.
How Can Jordan Lynch Help?
If you’re purchasing a new property, the process can take several months and if we arrange your mortgage, we’ll constantly review your product right up to completion to ensure that you obtain the lowest rate possible by the time you collect the keys. If you’re a homeowner and your mortgage product expires this year, we will book the best available re- mortgage or retention product for you six months in advance but will ensure that this is a product that can be cancelled, so if more favourable products are launched in the interim period, we will switch you to one of those prior to completion.
Call us on 0161 486 9316 or email sales@jordanlynch.com to learn more.