Inflation Fall: What It Means for Mortgage Rates
The latest inflation figures are set to be released on Wednesday, and experts predict a fall in inflation rates. This news is music to the ears of mortgage holders, as it could lead to better deals on their home loans.
How Does Inflation Impact Mortgages?
The price of fixed mortgages, which most homeowners have, tends to go up or down based on swap rates. These follow long-term projections of whether the Bank of England base rate will decrease or increase. The base rate stays higher when inflation is higher, and is often cut when inflation falls.
Variable and tracker mortgages are more directly tied to the Bank’s base rate, rather than loosely following predictions for where it will go.
What Could an Inflation Fall Mean for Fixed-Rate Mortgages?
An inflation fall to around 2.1 per cent is likely to have an impact on the rates on offer for new fixed-rate mortgages. Though a fall is expected, and so to some degree will already be priced into swap rates, brokers generally expect that a fall to this degree would lead to lenders lowering their rates a little.
Mortgage rates could fall with inflation
What Would an Inflation Fall Mean for Tracker and Variable Mortgages?
The inflation fall will not immediately affect those on tracker and variable rates. Tracker mortgage rates fall when the Bank cuts the base rate, as do most variable mortgages. An inflation fall would make a cut at the next meeting of the Bank’s Monetary Policy Committee (MPC) in June more likely, though a cut may not come until August or later.
The Bank of England’s Monetary Policy Committee meets in June
The Impact on Mortgage Holders
A fall in inflation could lead to better deals on mortgages, making it a great time for homeowners to remortgage or take out a new loan. With the Bank of England’s base rate likely to be cut, tracker and variable mortgage rates could also fall.
Remortgaging could become more attractive with falling inflation
Conclusion
The expected fall in inflation is good news for mortgage holders, who could see better deals on their home loans. With the Bank of England’s base rate likely to be cut, tracker and variable mortgage rates could also fall. It’s a great time for homeowners to review their mortgage options and consider remortgaging or taking out a new loan.
Mortgage holders could benefit from falling inflation
