01 February 2024
If you are covering the Bank of England interest rate decision and its impact on mortgages, please see the following comment from Karen Noye, mortgage expert at Quilter:
"In light of the Monetary Policy Committee's decision to maintain interest rates at their current rate, the recent moves by lenders to trim mortgage rates take on a particularly significant role in the current economic landscape. Many lenders have been reducing deals with some reductions reaching up to 0.85 percentage points before today’s announcement. This competitive posturing ahead of the decision is a calculated response to the dual pressures of the market and the evolving expectations of monetary policy.
"The initial aggressive rate cuts by lenders since January and before have been sparked by the market's bet on stabilised borrowing costs. This has evidently led to a mini war of rates, benefitting consumers but also revealing the market's sensitivity to policy signals.
"Without the certainty of a further cut it seems unlikely that mortgage rates can fall much further. The rise in swap rates—an essential benchmark for pricing fixed-rate mortgages—signifies mounting pressures that could reverse the recent trend of falling mortgage rates. This scenario not only affects borrowers but also has broader implications for housing market activity and, by extension, the economy.
"The recent dip in mortgage rates and the subsequent uplift in housing market activity may be signs of being out of the woods or simply just a momentary reprieve during a period marked by higher interest rates and cautious consumer behaviour. The slowdown in residential transactions towards the end of 2023, as reported by HMRC yesterday, illustrates the tangible impact these conditions have on the property market.
"Speculation about rate cuts later in the year fuels optimism for a more buoyant housing market, potentially leading to increased affordability for homebuyers. However, the path forward is fraught with uncertainty. Fixed-rate mortgages, which have so far benefited from a more competitive environment, may face upward pressure if the anticipated easing of monetary policy does not materialise as expected.
"Today’s hold in rates marks the first of many decisions this year that will be heavily scrutinised for signs that a drop is on its way. For now, borrowers can only play the cards they are dealt and if you are looking to buy or sell, seeking professional mortgage advice can help you understand what’s on offer from the market and whether its affordable for your unique circumstances."
