During the final 2024 meeting of the Bank of England’s Monetary Policy Committee (MPC), the vote concerning the standard base interest rate is expected to result in the decision to hold the rate steady. After two earlier cuts this year, in August and November, the rate was reduced by 0.25% each time taking the base from 5.25%, a sixteen year high, to 4.75%. There had been hope for a third cut by the MPC, especially since inflation had fallen to 1.7% in the twelve months to September and reported in October. This is below the target of 2.0% set by the Bank and the purpose of higher interest rates, however, the next inflation report released last month revealed inflation had grown to 2.3% unexpectedly higher than projected. This stifled any hope of another rate cut in 2024.

The next MPC meeting after the December gathering is in February, therefore the decision on 19 December will hold for weeks. If the inflation report on the day prior, 18 December, reveals inflation has dropped to target or under then perhaps a surprise vote by the MPC could occur.

Meanwhile, borrowers need not wait for that next vote to cut the rate by the MPC because lenders have been competitive and there are mortgages and remortgages near or under the current base of 4.75%. 

According to a recent government report there will be over half a million homeowners facing higher interest rates in 2025 as their current mortgage terms expire. They will have the choice of either remortgaging to the best interest rate they can find, or their lender will transition the mortgage debt to their standard variable rate (SVR). 

This is a move experts encourage homeowners to avoid as a SVR could be double or more the interest rate found with a remortgage. Rather than pay more than necessary, shopping for a remortgage could offer substantial savings. 

The expectation is that inflation will come further under control next year as the economy strengthens from years of uncertainty following Brexit, the global pandemic, and double-digit inflation. Stabilized inflation will bring further rate cuts to the standard base rate next year, but how soon and when is an unknown.

The initial MPC rate cut in 2024, which would be the first since March 2020, was due to occur early in the year. However, after many rate reducing expected meetings of the MPC came and went the first-rate cut did not happen until August. 

Homeowners who thought to wait for lower rates and bypass a remortgage likely felt the financial sting of moving to a SVR thinking rates would soon be much lower. In spring, the rates were reflective of two or three cuts to the base rate when not one had yet occurred. As inflation remained stubborn, the lower rates were increased as lenders waited on better economic signs and a reduction vote by the MPC. This is an example of why waiting could cause a financial sting.

For the many homeowners expected to come to the end of their mortgage term in the coming year, the choice to remortgage quickly and avoid a SVR will be a personal one. Some will choose to save money by avoiding a higher interest SVR and remortgage. Some will choose a fixed deal to lock in a rate and gain peace of mind, while some may remortgage to a tracker and count on a rate connected to the MPC base rate and choose a fixed deal later. Avoiding their lender’s SVR will still be smart no matter their choice for doing so will save money.

All homeowners should consider shopping for a remortgage. Gathering remortgage quotes offers valuable information for use either now or later. Shopping is quick and easy when done online and is faster with a remortgage broker, which would be a one stop shopping experience by possibly providing numerous quotes from a variety of lenders and there might be exclusive deals from lenders not offered directly to borrowers. One could also go from lender to lender website to gather quotes.

At the close of next year, the base rate could be as low as 3.75%, but again the forecasts for this year did not go as expected and the same could be for next year. It should therefore be a personal and unique strategy chosen by homeowners when it comes time to remortgage in 2025.