Borrowers, whether homeowners seeking a remortgage or hopeful home buyers shopping for a mortgage, are being warned the best deals could soon disappear. The low interest rate deals available are due to the competitive environment that emerged from lenders hoping to grab the attention of new customers. Stronger demand and a possible delay of a quick cut to the standard base rate of the Bank of England might bring about higher rates despite the Monetary Policy Committee (MPC) holding the base rate steady in the March meeting. 

The current base rate is 5.25% and has remained steady during the last five consecutive MPC meetings. The next meeting will be held in May with no scheduled meeting for April. The last inflation rate report revealed a decline to 3.6% for the twelve months to February. Inflation had remained stubborn for three months prior at 4.0%, which is double the target rate set by the Bank of 2.0%.

The strong decline in inflation for the last report is not triggering a forecast of a quick cut in the base rate. There are some that believe it could happen during the June meeting of the MPC, while others believe it will be toward the end of summer and likely in August. If there are rate cuts, they are expected to be small, such as 0.25% to test the base rate and keep inflation under control.

One sign pointing to a rate cut coming in 2024 is the change in the tone of the last MPC meeting. It was the first time in two years no member voted for a rate hike. Instead, one member voted for a rate cut while the others voted to keep the rate steady.

It should be noted that despite the MPC cutting the base rate this year, lender rates will not drop to mirror the ones of only a few years ago. This will come as hard news to homeowners coming to the end of their mortgage terms and leaving behind two-year fixed deals. In 2022, the base rate was vastly different than now. For instance, in March 2022, the MPC voted to increase the base rate from 0.50% to 0.75%. Lender offers would have reflected the low base rate, much as they do now with the current base rate at 5.25%.

Coming to the end of a mortgage deal and facing current interest rates could be a financial shock for some homeowners, especially those yet to experience the ups and downs of interest rates. It is estimated 1.4 million homeowners will come to the end of their mortgage terms in 2024.

While current remortgage offers will not reflect the low rates of 2022, a remortgage deal is preferrable over the homeowner being transitioned to the lender’s standard variable rate (SVR) if there is not a remortgage. Avoiding the normally higher and variable rate of the lender’s SVR is the path to saving money. Remortgage deals offer the ability to choose a fixed rate and the interest rate is usually lower and could be as much as one half lower than the SVR.

Homeowners are encouraged to shop online for a remortgage to determine what to expect for a rate change no matter where they are in their mortgage term. Those nearing the end of their term and within six months could remortgage without a penalty fee. Homeowners already on a SVR would likely find a lower interest rate than they are paying now if they chose a remortgage.

It is simple and quick to discover what remortgage offers are available by shopping online. Visiting the website of a remortgage broker could in a matter of minutes put remortgage quotes from a variety of lenders into the hands of a homeowner. Brokers often have exclusive deals not offered from lenders directly to borrowers, so shopping at a broker site could be a smart strategy. Also, homeowners could go from one lender website to another to gather quotes to review and compare. 

Hopeful home buyers are facing the same situation as the lowest interest rate mortgages are also disappearing as the lending market becomes less competitive for the attention of borrowers.

Even if the MPC cuts the rate earlier than expected, it would likely only be lower by 0.25% to 5.0%, and the lower rates available now are in line with what would be the new base rate and perhaps already lower. Therefore, choosing a deal now before the lowest interest rates disappear is why experts are warning shop for a mortgage or remortgage sooner rather than later.