Base Rate Cut - Mortgage Impact
With inflation currently below the Bank of England’s 2% target, the Bank had little choice but to reduce the base rate by 0.25% to 4.75%. This cut will affect mortgage borrowers in different ways, depending on their mortgage type. For those on variable or tracker mortgages, which track the base rate, monthly payments may decrease as lenders pass on some or all of this reduction, offering potential relief to households facing high repayments.
Fixed-rate mortgage holders, however, will not see immediate changes since their rates are locked in. However, the base rate cut may encourage lenders to lower rates on new fixed-rate products in the coming weeks, creating potential savings opportunities for those considering remortgaging.
Rising Swap Rates Could Limit Mortgage Rate Reductions
Swap rates have seen a sharp increase following the recent UK Budget and American election due to heightened market uncertainty and expectations around inflation and economic policy. In the UK, the Budget included significant government spending commitments, which markets interpreted as likely to increase public borrowing. This expectation of higher borrowing has led to concerns about inflationary pressures, pushing swap rates upward as investors demand higher returns to offset potential inflation risks.
Similarly, the U.S. election has introduced its own layer of uncertainty, especially around fiscal policy and interest rates. With the possibility of increased government spending under new or continuing leadership, market participants are anticipating sustained inflation, which can also drive up swap rates. This rise in swap rates directly impacts mortgage pricing, as lenders use these rates to determine the cost of offering fixed-rate mortgages. Consequently, even with the Bank of England’s base rate cut, mortgage rates might not fall as much as expected due to this up
7th November Swaps
1st November Swaps
Schedule A Mortgage Review
If you want to benefit from the latest rate reductions, call 0800 0350095 or click on the button below to schedule a review.