What’s Next for the Base Rate and UK Mortgage Market?

For many homeowners on fixed rate mortgages, the upcoming Bank of England (BoE) meeting is a cause for cautious optimism. Predictions of a base rate decrease could signal a turning point in the mortgage market, potentially offering remortgage opportunities with lower interest rates. However, navigating this situation requires a clear understanding of the potential impact and a strategic approach.

The UK mortgage market is poised for change

For many on five-year fixes that are now coming to an end, this will be received with a warm embrace when assessing which lender to remortgage with, while for borrowers that have been on two-year fixed products, this easing can’t come soon enough.

The BoE base rate, along with swap rates, directly influences the cost of borrowing for lenders. If the base rate drops, lenders typically adjust their mortgage rates downwards. This translates to potentially significant savings for remortgage customers nearing the end of their fixed rate deals. Even a small decrease in the base rate can lead to a noticeable reduction in monthly mortgage payments, freeing up essential household income.

While the prospect of lower rates is enticing, it’s important to remember that the BoE’s decision this month might not be the immediate trigger for a significant drop in mortgage deals.

Recent inflation figures have been higher than expected, which has pushed back the first base rate cut of the year. Additionally, lenders may take time to adjust their product offerings, so the impact on lower remortgage rates might still be delayed.

Strategic Remortgaging

For homeowners approaching the end of their fixed rate deals, closely monitoring the mortgage market is crucial. Brokers should remind their clients to be aware of their end date so they can plan their remortgage well in advance and start comparing their options sooner rather than later. Many borrowers will be able to secure a competitive rate even before the Monetary Policy Committee (MPC) makes a decision to cut the base rate.

Clients should also be advised to consider the difference between a fixed or tracker rate. Tracker mortgage rates may be tempting in the face of a possible base rate cut, but fixed rate deals offer peace of mind and protection against future rate rises.

Mortgage rates could be on the decline

Planning and understanding the potential impact of the BoE’s decision means remortgage customers can leverage a potential decrease in base rates to secure a more affordable mortgage and unlock long-term financial benefits.