Inflation has reached the target rate set by the Bank of England for the first time in almost three years and that has brought hope of lower interest rates. Inflation in May was reported at 2.3% and declined to 2.0%, which is the target rate. Tomorrow, the Bank’s Monetary Policy Committee (MPC) will be meeting to consider whether lowering the standard base interest rate is needed or it should hold steady. Raising the base rate to curb spending and bringing inflation to the target level of 2.0% has been the goal of the MPC, but it is not yet time to cut rate so say experts.

The MPC is expected to keep the base rate steady at 5.25%, a 16 year high, for the seventh consecutive MPC meeting. If the majority vote of the committee does keep the rate steady, the next possible meeting for a rate cut will be in August as there is not a meeting scheduled for July. However, the expectation for the MPC to cut the base rate is not for August, but September.

The service sector is still sitting high at 5.7% in the 12 months to May and will likely deter the MPC from voting for a rate cut in the next two meetings. Food prices and petrol prices are also high. 

While inflation has met the target rate, relief to consumer budgets will take awhile to trickle down. Along with the expectation that lenders will hold back from cutting their lending rates, it means there will be more months of financial pressure. 

This could be disappointing to the many thousands of homeowners hoping for a sooner than later rate cut in 2024. Those that secured three- or two-year fixed rate mortgages expiring this year are facing higher rates than they were used to paying. While they would not find rate offerings of 2021 or 2022, experts have encouraged homeowners to shop for a remortgage. 

Even on the advice of experts, there are those that have put off remortgaging and allowed their term to end. In doing so, they had hoped for an upcoming rate cut and for lenders to cut their offers. However, in allowing their term to expire, and push off remortgaging, they will have had their loan transitioned to the lender’s standard variable rate (SVR). Avoiding a SVR could save a substantial amount of money, choosing to be on one is paying more than necessary.

The expectation for a rate cut has been pushed back several times this year. In the start of the year, it had been hoped the MPC would cut the rate by early spring. The forecast was then pushed to June, then August, and now hope rests on September. Homeowners that have been moved to a SVR and hoping for lower lender cuts are paying more than needed month after month.

A SVR could be double or more the interest rates available in remortgaging. Rather than continue paying more, homeowners are being encouraged to shop for a remortgage just as they were encouraged to do so at the start of the year. 

In actuality, when the MPC does vote to cut the rate, it will likely be small at 0.25% taking the base rate to 5.0%. There are already lenders offering deals reflective of a base rate at that level. Therefore, shopping online for a deal now could find the best remortgage deal and not only eliminate the higher SVR interest rate, but offer peace of mind should the forecast for a rate cut be pushed again.

Shopping online for a remortgage deal is fast and easy. Visiting the website of a remortgage broker could put numerous quotes from a variety of lenders in front of the homeowner in minutes. Brokers often have exclusive deals not offered directly from lenders to borrowers, making shopping with them a smart strategy. Homeowners could also go from website to website of remortgage lenders to gather quotes to review and compare. 

The decision of the MPC on Thursday could follow the forecasts or bring a surprise cut to the base rate, but just as forecasts called for an early spring cut only to leave us moving into the first day of summer with the same peak base rate of last year, it is likely smart to find financial stability in the rates available now rather than take a risk of a sooner than later rate cut.