The Bank of England voted today (14th December 2023) to keep the Base Rate at 5.25%, the committee voted 6 to 3 in favour of keeping it as it is. The Base rate is still at a 15 year high however there is growing optimism that rates have peaked and the increases that they’ve made are having the desired effect. The Bank of England have had to increase the Base Rate to prevent inflation getting out of control as this affects everything that we buy, inflation was as high as 11.1% earlier this year but this has since reduced to 4.6% but still over the governments target of keeping inflation under 2%.
Why are mortgage rates so high?
Mortgage rates have increased a lot over the past 12 to 18 months, this is a result of uncertainty in the financial markets following the mini budget in October 2021 and impacted further by inflation increasing at a very quick rate earlier this year. The Bank of England had to increase the cost of borrowing to curb peoples spending as this helps reduce inflation, they have increased the Base Rate from 1.75% in September 2021 to 5.25% today.
What is the impact of today’s news for me and my mortgage?
As there hasn’t been a change to the Base Rate today, you are unlikely to see a change to your mortgage. However, today’s accountment is positive news if you are one of the nearly 1.6 million people who has their mortgage deal ending in 2024. It is positive news because the fact that it didn’t change today will breed further confidence in the financial markets, it shows that we are past the worst of inflation. We have seen a positive reaction to the news today, the rates that lenders trade money between them have fallen a lot and to a level that we haven’t seen for over a year. This is important as these rates are what lenders use to price their fixed rate mortgage products, therefore should this continue as expected the rate that you can get for your mortgage could be lower than what they are today.
When should I look to secure a new mortgage deal if mine is expiring?
As a general rule, you can look to secure a new deal for your mortgage 6 months before the end of your existing one. This would certainly be the case if you wanted to move your mortgage to a new lender, however some mortgage providers only allow their existing mortgage customers to secure a new deal 3 months before the end of their current product.
We are still in a very unpredictable market and it might not take much for rates to start increasing again. Therefore, we feel it is important to understand what options are available to you at the earliest opportunity. This ensures that you have a worse case option of your mortgage, most mortgage lenders will allow you to change the rate if they fall from the point you apply for the mortgage to just before your new product is due to start. If you don’t secure anything and rates increase, unfortunately you will have to take one of these products with the higher rate.