The Bank of England’s Monetary Policy Committee (MPC) will meet on Thursday. The day prior, on Wednesday, the latest information about inflation will be released. The members of the MPC will take the February inflation report into account and determine how the current standard base rate is doing in curbing spending in the shadow of wage growth. The expectation is they will determine the current base rate as sufficiently impacting inflation and will leave it steady, even if inflation declines from the last reported 4.0%.

If the rate is held steady it will mark the fifth consecutive meeting of a majority vote to keep the current rate, which followed fourteen consecutive meetings in which the MPC hiked the rate to fight inflation. Last year the inflation rate for the twelve months to February 2023 was 10.4%, up from the previous report of 10.1%. 

The target rate set by the Bank is 2.0%. The last inflation report of 4.0% was the same as the previous month. It is double target but expected to decline to target over the next two quarters prompting a rate cut by the MPC. 

Reaching the cut sooner was an optimistic outlook that took hold during the first month of the year. In January, there was not a MPC meeting which kept it the same 5.25% of December into February when the first meeting of the year was held. Inflation held steady and so did the base rate. 

However, despite the decision by the MPC, lenders began in late January and into February creating a competitive lending market. As one offered a lower mortgage rate, so did another, and rates dropped further until lenders were offering unexpected cuts in their lending rate offers with some falling below the base rate of the Bank. 

In early March, lenders began pulling their lowest offers. While the average five-year mortgage is still below the base rate, it is higher than last week, and by next week it will likely be higher. Lenders are less optimistic about the risk in lending as the housing market reports a boost in the market before the expected normal spring boost. If home buyers are so strongly entering the market, perhaps it is too much too fast. 

Meanwhile, homeowners are struggling. Many two-year fixed rate mortgage holders have come to the end of their current term and are either choosing a remortgage or being transitioned to their lender’s standard variable rate (SVR). The change in their interest rate and repayments could be putting their home’s affordability into question. More homeowners are falling into arrears and without their previous interest rate likely to ever be a choice again, help is needed.

While there were rumors about helping first time home buyers onto the market with a new lower deposit scheme, it did not happen. The 1.0% deposit requirement scheme was risky and would have likely caused more problems of affordability in the near future. Perhaps, it is not the new homeowner that needs helped onto the market due to the current surge in demand within the housing market. Instead, homeowners are more in need of support and solutions.

There were likely many homeowners securing their two-year fixed mortgage in 2022 that would have found it hard to believe the rate would grow so much in just one year, let alone where it would sit when their term ended. Few saved and prepared for the higher repayments they will face when their current term ends.

The Bank’s base rate was only 0.50% in March 2022. Homeowners securing their mortgage had choices of rates much lower than today. As their term ends, they can remortgage or take on a SVR. A remortgage will offer the lowest rate, and the opportunity to choose a fixed rate deal. Avoiding a SVR could save a substantial amount of money, especially should a lender raise their SVR, and this could happen despite the MPC holding the base rate steady.

According to experts the first rate cut from the MPC will not come until August. It will not likely be a large decline, but rather a testing cut to determine how inflation and borrowers respond. Possibly the rest of the year will see further cuts, but for now, the rate will likely hold steady, at least if inflation moves toward target.

We are one day away from two key pieces of information that will definitely impact borrowers in the coming days and weeks, if not months ahead. As the MPC votes to keep the rate steady, it will also be important to watch the decisions of lenders. 

Homeowners are encouraged to shop sooner rather than later if they have taken on a SVR and put off a remortgage in the hopes of seeing lower rates than available now. The MPC will not return to the historically low rates of 2021 and 2022. The lower and attractive rates now are unexpected and not brought about by the decision of the MPC, which means that as quickly as they appeared they could disappear and become more reflective of the current base rate of 5.25%. 

Those that are close to having their mortgage term end in the coming weeks or months, the same advice from experts holds true, shop for a remortgage soon. Know what opportunities are available and put aside hopes the interest rates will return to choices found in 2022. 

Shopping ahead of time online helps homeowners gather information important in making a remortgage decision. Remortgage brokers could offer exclusive deals and will provide quick quotes from a variety of lenders. Going website to website of remortgage lenders is another way to gather quotes to review and compare. 

The inflation report tomorrow and the MPC meeting following on Thursday might not change the Bank’s base rate, but the information could certainly change what lender offers are available today compared to next week.