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Base Rate Held At 5.25% While Inflation Meets 2% Target

Royal Exchange Bank of England London Picture

Base Rate Held At 5.25%

Bank of England’s (BoE) Monetary Policy Committee (MPC) again voted 7-2 to maintain the current Base Rate at 5.25% for the seventh consecutive month despite inflation falling further to their 2% target.

This decision was again followed, as in previous months, by initial promises of an imminent rate reduction. However, it’s dangerous to take an August rate for granted despite the European Central Bank recent cuts. Pressure is now mounting on BoE to start cuttting rates once the election turbulence subsides.

All eyes will be on the next BoE meeting scheduled for 1st August.

Swap Rates & Mortgage Realities

We have recently observed a trend of swap rates reducing and stabilising. This movement, primarily driven by a decline in inflation, offers a glimmer of hope for homeowners and prospective buyers. It’s important to note that while inflation has reached the Bank of England’s 2% target, this doesn’t automatically mean immediate relief in the form of lower fixed-rate mortgage products.

However, the decline in inflation is a positive sign, indicating that the economy is cooling off and that the aggressive interest rate hikes may have been effective. Those looking to secure fixed-rate mortgages should not assume that falling inflation will immediately lead to lower mortgage rates.

Bank of England’s cautious stance suggests that homeowners should not expect immediate reductions in fixed-rate mortgage products. In this evolving landscape, it’s important to remember that patience and prudence are key. While the journey to lower mortgage rates might be gradual, the foundations for a stable and sustainable economic environment are being laid. Still, it’s essential to maintain a realistic outlook and make decisions that align with your long-term financial goals.

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