It’s good news following the Monetary Policy Committee’s (MPC) review of the base rate. A vote has been made to cut it by 25 basis points. The new base rate has been confirmed at 4.75%, having been lowered from 5%.
This reduction has been widely predicted since the inflation rate dropped to 1.7% in the year to September. Inflation had previously remained slightly higher than the Bank of England’s 2% target, sticking at 2.2% for 2 months.
What does the new base rate mean for your mortgage?
If you have a tracker mortgage, which is usually linked to the base rate, the interest rate you pay will come down shortly in line with the new base rate. With a discount mortgage or other type of standard variable rate (SVR) mortgage, the rate you pay may come down if your lender decides to reduce it. As lenders set their own SVRs, a reduction is entirely at their discretion. For a fixed rate mortgage, the rate you’re charged will remain the same until the end of your fixed term.
If you’re looking to apply for a new mortgage or want to remortgage, the rates are currently much lower than they were in 2023, even though they’re still higher than in previous years. Lenders had previously factored in this month’s anticipated base rate cut to new fixed-rate deals. This has made them more affordable for borrowers.
Will the base rate continue to be cut from now on?
A second cut had been anticipated in December, which is when the MPC will hold its next review. This was in light of the lower-than-expected inflation rate figure. However, following the Autumn Budget, this is not looking as certain. Instead, it’s speculated that a further cut may not happen until February. As well as that, the prediction for the number of cuts expected to occur throughout 2025 has been reduced.
In response to the Autumn Budget announcements, some lenders have already increased their mortgage rates. This is worrying for borrowers whose fixed-rate terms are coming to an end before the year is out. Despite the newly reduced base rate, lower mortgage rates may not necessarily be on the cards as had previously been hoped.
Discuss your mortgage options with an expert
If your fixed-rate deal is due to expire soon, you’re looking to get on the property ladder or you want to remortgage, get in touch with us on 01322 907 000. Our mortgage brokers will have a look at the options available to you, including exclusive deals that lenders only offer via brokers. They will provide you with comparisons and impartial advice to help you make the best decision for your needs.
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