9 May 2024
If you are covering the latest BoE interest rate decision and what it means for personal finances, please see the following comment from Karen Noye, mortgage expert at Quilter:
“We have been anticipating a turning point in the mortgage and housing market as we approach the summer months, and though we are yet to see an interest rate cut, the additional vote in favour of one at the Bank of England's latest monetary policy meeting offers a glimmer of hope that rate cuts are edging closer. This could have a positive impact on mortgage rates in the nearer term given lenders price in rate cuts ahead of time and it still looks likely one could materialise in the coming months assuming the data continues heading in the right direction.
“A fall in mortgage rates would present a more favourable borrowing market for those buyers who have been sitting patiently in ‘wait and see’ mode which could help buoy the market. However, it is worth noting that we are likely to see a gradual fall in rates as opposed to a sudden drop even if the BoE does opt to cut rates at future MPC meetings.
“In the meantime, there are options you can explore that can help lower your mortgage rate further, such as putting down a larger deposit to decrease the loan to value level which can often help you secure better rates. The length of time you fix your mortgage deal for can also impact the rate you pay. Many five year fixes will come with lower mortgage rates than a two or three year fixed deal. However, given we are likely to see interest rates start to come down within this timeframe, it will be important to consider the longer term as if rates drop in the coming years then you could end up paying more than is necessary in the longer run if you lock in for a longer initial term at a time when rates are still elevated."
Savings rates
“Savings rates will also be impacted by any future BoE interest rate cuts. Though banks and building societies were relatively slow when it came to passing on higher interest rates, the same is unlikely to be said when it comes to lowering them. For those looking to lock their money away for a fixed term, it is a good idea to explore the interest rates available now as they are unlikely to remain at current levels for that much longer. If you have cash savings held in account without a fixed rate then it is also important to be aware that the level of interest you are currently earning will likely fall, so you should explore other options to ensure you are making your money work as hard as possible. If you have excess savings held in cash that you can put away for at least a few years, you may wish to consider investing it. Putting money to work in the stock market gives it the best chance to grow, and the sooner you invest and the longer you do it for, the more likely you are to have the potential for healthy returns.
“Wherever possible, you should seek professional financial advice to help you navigate the current landscape, and for anyone looking buy a new home in the near future, seeking professional mortgage advice will be vital. A mortgage adviser will be better able to keep up with any changes in the market and can help you explore the options available to you to help ensure you get the best possible deal for your personal circumstances. It is also worth remembering that if you are looking to take a new mortgage, particularly if you are remortgaging, securing a new product in advance will allow you to better understand what you will be paying and budget accordingly. Should rates drop between when you apply and when the new mortgage starts, with most lenders it is relatively simple to amend your application to a new revised, cheaper deal.”
