Bank of England holds base rate, but more rate cuts could be coming
The Bank of England has voted to hold the base rate at 5.0% after last month's cut. Despite the hold, as recently as this morning mortgage lenders have been cutting their rates. With market activity picking up, and another cut expected in either November or December this year, things are looking up in the property market.
Were we expecting a base rate cut?
After 4-years of rises or holds, the base rate dropped from a 16-year high of 5.25% to 5.0% last month. Although this brought optimism back into the market - especially amongst first-time buyers - another cut wasn't expected to be announced today.
Despite the Fed making a cut to its own rate yesterday for the first time in four years, core inflation in the UK (which excludes volatile items such as energy and food) went up by more than expected to 3.6%.
Because of this, market predictions showed a 73% chance the Bank of England would leave their base rate of interest on hold. In the end, it was a clear decision, with the MPC voting 8-1 for the base rate to stay at 5.0%.
Will the Bank cut the base rate again?
There is mounting pressure for the Bank to make another cut. With overall inflation staying more or less at the Bank's target, and GDP growth at zero for three of the last four months, some big names in finance are putting pressure on the MPC to reduce the base rate again - and soon.
Another cut would not only encourage mortgage lenders to continue to cut rates, it would also bring some breathing room for everyday people. Households are in desperate need of relief following several years of steep price rises on top of the longest pay squeeze in modern history.
What does this mean for mortgages?
Although the base rate has stayed unchanged, some big names cut rates earlier today ahead of the MPC meeting, slashing deals up to 0.2%. We're also now seeing lenders pass on rate reductions to first-time buyers and prospective homeowners with small deposits, although the lowest rates are still reserved for those with hefty down payments.
There is more good news too. Swap rates – the main influence on fixed rate deals – have been falling, which has given lenders the wiggle room needed to pass savings on to borrowers. Plus, two more base rate cuts are expected by the end of this year, bringing the base rate to 4.5%.
So we expect to see mortgage rates continue to come down over the next few weeks and months 👏
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