Mortgage Holders Dealt a Blow as Base Rate Remains Unchanged
Homeowners hoping for some relief on their mortgage payments have been dealt a blow as the Bank of England decided to keep the base rate unchanged at 5.25%. This decision has sparked concerns among mortgage holders, with many expecting a rate cut to ease the pressure on their finances.
Mortgage rates have been edging up in recent weeks.
According to trade association UK Finance, around 1.6 million fixed-rate mortgages are due to end or have already ended at some point in 2024. This means that many homeowners will be remortgaging onto significantly higher rates before seeing the base rate start to be cut.
Kate Steere, housing expert at personal finance comparison site finder.com, said of the decision to hold the base rate: “This will no doubt be a huge blow to borrowers who were hoping for some relief for their mortgage payments, with many big lenders increasing their rates in recent weeks.”
The Impact on the Housing Market
The hold on the base rate may also affect sentiment in the housing market. Mortgage rates have been edging up in recent weeks, with the average two-year fixed-rate homeowner mortgage on the market now at 5.93%. The average five-year fix is 5.51%.
The housing market may be affected by the base rate decision.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “We still anticipate that the MPC (Bank of England Monetary Policy Committee) will cut rates later this year, and although mortgage rates have ticked up slightly in recent weeks, they remain lower than they were this time last year.”
However, those coming to the end of a fixed-rate mortgage that was agreed before the bank rate started to rise in December 2021 will need to prepare for a significant increase in their mortgage payments.
“Anyone who is concerned that they may experience financial difficulties in the coming months should contact their lender as soon as possible, preferably before missing any payments,” Broadhead added.
A Summer Rate Cut?
The Bank of England will be able to assess upcoming data releases, including inflation and jobs figures, before its next meeting in June. Matt Smith, Rightmove’s mortgage expert, said: “We’d expect that average mortgage rates will begin to trickle down again soon … The market is still assuming that the first base rate cut will happen in the summer, and today’s decision is unlikely to change that view.”
Laura Suter, director of personal finance at AJ Bell, said: “The real impact of this delay will be felt by homeowners, who will have to endure higher rates for longer. It means more people will come off their cheap mortgage deals and onto higher interest rates before the base rate is cut.”
Mortgage payments may increase for some homeowners.
The decision to hold the base rate unchanged has sparked concerns among mortgage holders, with many expecting a rate cut to ease the pressure on their finances. As the housing market continues to evolve, it remains to be seen how this decision will impact homeowners in the coming months.
