Making the right decisions about your mortgage in a changing market
by Adam Tovey – Director | Independent Mortgage & Protection Adviser @ Prism Mortgage & Protection Advice
In this blog post, we’ll break down how the recent Bank of England base rate and rate of inflation updates, could affect mortgage rates.
Understanding the Bank of England’s Decision
The Bank of England announced on 20th March 2024 that it would keep interest rates steady for the fifth meeting in a row. This decision was expected, but what caught attention was the hint that rates could be cut in the future, which could be good news for anyone looking to secure a mortgage.
Why the Speculation About Possible Rate Reductions?
The things we buy broadly increase (or inflate) in price over time. The rate of inflation tells us how much more expensive things are today than they were this time last year – so, if inflation (or the rate of inflation) is 10%, broadly speaking, that thing you just bought was 10% cheaper this time last year.
The primary purpose of the Bank of England is to keep the rate of inflation at a sustainable level, ideally 2%.
Inflation skyrocketed after the pandemic and following Russia’s invasion of Ukraine to a peak of 11.1% in October 2022. However, in March 2024, the rate of inflation dropped to 3.2% – its lowest since 2021 – meaning things aren’t getting more expensive as quickly as they were before.
What Was Behind the Inflation Drop?
Several factors contributed to the decline in inflation. The Bank of England would argue that their previous base rate increases have meant that we have all had less money in our pockets to buy things, meaning demand has reduced, and this has forced the slow down in price increases.
What Does This Mean for You?
The Bank of England have been increasing the base rate, from 0.1% in December 2021 to 5.25% in August 2023, in an attempt to reduce the rate of inflation – and that appears to be working. While they haven’t made any immediate changes – and they have explicitly told us that we should not expect rates to reduce to the hyper-low levels that we had all become accustomed to – this has led to speculation that they could cut the base rate in the coming months.
What does this mean for your mortgage? Mortgage lenders broadly follow suit with base rate changes, meaning mortgage rate reductions may be on the horizon.
If you’re thinking about buying a property or refinancing, this could be great news.
Conclusion: Stay Informed & Empowered
We’re here to help you navigate the ever-changing economic trends.
While we can’t predict the future, we can cut through the noise to keep you informed about what’s happening in the market, empowering you to make the most appropriate mortgage decisions.
Keep an eye on our blog and please do get in touch with any questions.
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