It may have been expected, but it doesn’t mean it wasn’t still a disappointment as the Bank of England’s Monetary Policy Committee (MPC) voted on Thursday to hold the standard base interest rate steady at 5.0%. This vote followed the meeting held in August that resulted in the first cut to the base rate since March 2020. Another cut is hoped for this year, and many had thought it would be in September. Now, the wait for the next possibility will be for the meeting in November or December as there is not a MPC meeting scheduled for October. 

The vote by the committee was a strong no to any rate cut as there were eight voting to hold the rate steady and one voting for another cut. 

Inflation was reported on Wednesday to have remained slightly above target of 2.0% at 2.2%. The same level of inflation was reported in the previous month, and the two months prior it had reached target. It was not a surprise to the MPC for inflation to have remained above target as it is expected to do for the rest of the year and possibly rise to 2.75%. It is in 2025 that inflation is expected to fall to target or below and remain requiring then further reductions to the base rate.

The MPC rate will however, not return to the historically low pandemic level of 2020 when it was cut to almost zero at 0.1%. Borrowers should not be awaiting a return to a borrowing cost with rates that low. 

Unfortunately, affordability will remain an issue for many homeowners in need of a remortgage at the end of their mortgage term having secured a cheap rate when lenders were offering their own historically low mortgage offers. As their term has expired or will expire, they will no longer have the low and cheap rate they were paying, but face choosing from rates double or more what they were used to paying.

The interest rate is what determines the cost of borrowing. When rates are low, borrowing costs are cheaper than when they are higher. While the rates offered in the pandemic were unbelievable low, it made buying a home much more affordable despite higher asking prices. Now that homeowners are losing their fixed rates from a time when borrowing was cheaper, the new rates, though better than they have been in years, are causing financial shock to many household budgets. 

Homeowners may be totally unable to afford their home with the new rates available. Some may be forced to sale to escape the financial burden of higher rates, others may turn to renting their home or part of it to afford the new repayments. Creativity is certainly coming into play for both homeowners trying to figure out how to stay homeowners and for home buyers trying to get on the property ladder.

Experts have encouraged homeowners to shop online for a remortgage. In a matter of minutes, remortgage quotes could be offered to help a homeowner review and compare the opportunities available. This is especially true when shopping online at a remortgage broker website. Brokers could offer numerous quotes from a variety of lenders and perhaps even an exclusive deal from lenders not offered directly to borrowers. Homeowners, of course, could also go from lender-to-lender websites to gather quotes to compare.

It is likely a smarter strategy to shop for a remortgage than allow the mortgage term to end without a new deal and be transitioned to the lender’s standard variable rate (SVR). The SVR will almost certainly be a higher interest rate than found with a remortgage and therefore be more costly. 

Choosing to move to a SVR in hopes of awaiting lower interest rates as the MPC votes to reduce the base rate is more likely to have the homeowner paying more in costs on a SVR while awaiting another vote to cut the rate. It isn’t even necessary since lenders have entered a competitive lending mode and offers are already reflective of another rate cut that has yet to happen.

Shopping now for a remortgage is a smart choice. It will offer valuable insight into opportunities available whether the homeowner has already moved to a SVR, or is nearing the end of their mortgage term. There could be homeowners that remortgaged when rates were much higher and are seeking a lower rate deal to save money even though they are not near time for their current mortgage term to end. 

Lenders have great rates already near or even below the 5.0% current base rate, with some already at 4.0% which is lower than what another 0.25% reduction to the base rate would be with a majority vote by the MPC to take the rate to 4.75%.

The base rate was thought to receive the first cut of the year in early spring, yet it didn’t occur until August. Those are expensive months of paying on a SVR awaiting a base rate cut to choose to remortgage. The same could occur again waiting for the next cut. 

Instead of concentrating on the actions of the MPC, it would be important to shop for a deal now while lenders are still optimistic of a 2024 rate cut and are competitively reducing their offerings to gain the attention of borrowers. The window on the competitive lending market could close at any time taking with it the unexpectedly low deals available. Spending a few minutes online this weekend shopping for new deals could not only offer savings, but peace of mind for the homeowner who had felt stuck playing the waiting game for a lower base rate and spending more money than necessary doing so.