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Bank of England base rate holds at 5.25% - What does this mean for mortgages?

Bank of England interest rates hold steady at 5.25% for the second time but what does this means for UK mortgage holders and savers?

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 2 November 2023

5 min read

Bank of England base rate holds at 5.25% – What does this mean for mortgage borrowers and savers?

The Bank of England has this morning announced that it will hold the base rate at 5.25% for the second consecutive time. This news should be positive for mortgage borrowers but could mean saving rates may drop in the coming weeks and months.

Consumers looking to improve their savings rates should consider locking in some of the top fixed rate deals now. Unfortunately, the future landscape for mortgage borrowers is slightly less obvious and could still change in the coming months.

What does this look like for mortgages and the property market?

This does not come as a surprise as most of us have predicted that the Bank of England would not increase the base rate again in this review. Another key reason for the hold of the base rate is inflation ‘sticking at 6.7%’ in the last few months.

Personally, I am very pleased to see the base rate sticking for a second consecutive month, and other positive news suggests that property prices are nearly 20% lower than 12 months ago.

Should I fix my mortgage yet or should I wait?

The majority of mortgage borrowers in the UK are currently sat on a fixed rate deal and so the Base Rate will not impact them. If your mortgage deal is due to come to an end in the next 6 months then you might want to think about your options.

Many mortgage borrowers are still on longer term fixed rates which means that they will not need to think about re mortgaging or changing their mortgage for a while. We’re still seeing the after effects of lower mortgage rates from before 2020 When the mortgage rates started to increase.

However, there are an increasing number of mortgage borrowers coming towards the end of lower rate fixed mortgage deals who will be considering their options. It may be time to start thinking about what you might need to do and budgeting for a higher mortgage rate.

Top things to consider for fixed rate mortgages:

  • Does your mortgage deal end soon?  Anyone on a special rate that comes to an end in the next several weeks or months might want to consider the options of both fixed and tracker rate mortgages. This depends very much on your attitude to risk and whether you are happy with the potential for your mortgage rate to go up as well as down. Don’t forget that mortgage rates can still go up even though there has been a slight amount of stability in the past few months. Always consider any early repayment charges when entering a new special rate mortgage deal.
  • Is your mortgage deal ending in the next six months? Those mortgage borrowers with a special rates that is due to come to an end in the next six months should keep an eye on mortgage rate fluctuation. We might start to see some short term lower fixed rate deals that you could tie yourself into in preparation for your mortgage deal coming to an end. The next several months will be interesting times for mortgage rates, and especially fixed rate deals.

Many predictions saw expectations of fixed rates averaging well above 5.5%, which seemed reasonable if the Base Rate continued to increase. As we’ve seen some stabilisation in the past couple of months, there has been a slight drop in fixed rate deals.

Best 2 year Fixed rate mortgage deals

Two year fixed rates (also known as short-term fixed rates) have dropped the most of all fixed rates over the past 3 months, by as much as 0.6%. We’re now seeing these mortgage deals as low as 5.1% for 60% LTV’s and 5.5% for 90% LTV’s.

Best 5 year Fixed rate mortgage deals

My mortgage is on a standard variable rate, what should I do?

Most lenders standard variable rates at the moment currently sit at around 8.18% in October 2023, which is an increase of nought 0.09% from September. This is where we’ve seen the most significant rises in interest rates since 2020, which were previously around 4%.

Any mortgage borrowers currently sat on a lender’s standard variable rate should be immediately looking at their options to remortgage or refinance, unless there are significant reasons not to. If your mortgage is currently at the lenders standard variable rate then there should be no issues with early repayment charges or any penalties to remortgage.

What about product transfer rates?

A product transfer is a simple and quick way to change your existing mortgage rate by sticking with your current lender. This can also often be done online via your customer portal on your mortgage lenders website.

Most modern mortgage customer portals will give you the option to transfer your mortgage to another rate, and will show you which rates are applicable. This will avoid any issues with new mortgage applications, credit searches, and financial checks.

What about rates for savers?

Since the Bank of England base rate has started to level out we have seen savings rates start to follow the same pattern. It’s always difficult to make long term savings decisions, especially when there is so much certainty in the economy.

We have seen a slight dip and interest rates for savings, especially one year fixed rate savings deals in the past few months. Since the bank base rate has stabilised in September one year fixed rate deals hit a peak of 6.2%, and are steadily dropping.

What about a Cash ISA instead of savings?

Well saving rates have been increasing over the past two years, they’ve been more attractive to savers than Cash ISAs. Anyone who has been earning high interest on their savings over the past couple of years might be better off thinking about Cash ISAs to maximise their earnings and reduce their tax liability.

More mortgage and home news

Here’s more of the latest news affecting mortgage borrowers and savers in the UK.

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