On Thursday, the Bank of England’s Monetary Policy Committee (MPC) met and the majority of the members voted to hold the current standard base interest rate steady at 5.25%. It marks the fifth consecutive meeting of holding the rate. It did not surprise economists nor other experts for there were few expecting a rate cut even if inflation declined, which it did. Inflation had declined to 3.9% in November but increased to 4.0% in December and January. The latest report on inflation for the twelve months to February revealed it had declined to 3.4%. No longer sitting at double the target rate of 2.0%, it signals the peak base rate was reached at 5.25%, and the MPC will likely begin voting for a cut in the first half of the year.

The experts believe there will be at least three rate cuts this year with the first coming in the summer. There have been forecasts for the earliest to be June, while there are others believing it will be in August. The cuts to the base rate will likely be small marginal declines rather than risk a return to higher inflation. 

The expectation is for the MPC to vote for rate cuts of 0.25%. If three cuts do occur at that level, the base rate would be 4.5% by the end of the year.

During the MPC meeting, eight of nine members voted to hold the base rate steady, with one member voting to cut the rate by 0.25%. The vote is significant, for it is the first time since September 2021 that no member voted for a rate increase.

In a remark concerning the MPC meeting, Andrew Bailey, the Governor of the Bank of England, said, “In recent weeks we’ve seen further encouraging signs that inflation is coming down. We’ve held rates again at 5.25% because we need to be sure that inflation will fall back to our 2% target and stay there. We’re not yet at the point where we can cut interest rates, but things are moving in the right direction.”

The forecast for a cut in the base rate will no doubt be good news for borrowers. Hopeful home buyers have already shown stronger demand in the housing market as an unexpected competitive market emerged in lending. Mortgage deals were released dropping the interest rate offers throughout February. Eventually the best deals offered were below the Bank’s base rate. The average five-year fixed rate mortgage still remains under the base rate despite lenders pulling back their lowest interest rate deals.

There had been concern as to how inflation would report for February. This created less optimistic forecasts than previously, and lenders broke the trend of offering lower rates. With inflation dropping to 3.4%, and a cut expected by the MPC in summer, lenders might leave the current products on the market for longer and perhaps bring back lower ones.

Hopeful home buyers will have to make a decision as to buy now or later. Waiting could have them choosing from lower rates should the MPC cut the base rate three times by the end of the year. However, as the housing market begins to show stronger demand, asking prices could increase making it more expensive to buy despite lower rates. 

The housing market has experienced a boost and asking prices have risen according to estate agents and housing market reports. By waiting out lower interest rates, a home buyer could find stronger demand as well as a lower supply of listed properties. This could cause a greater bump in house prices and might price some buyers out of the market.

Homeowners will have their own decisions to make as the economy transitions. Those coming to the end of their mortgage term in 2024 will leave behind their current interest rate and face a new choice. If the homeowner is nearing the expiration of a two-year fixed mortgage, their rate could have been obtained when the base rate was still under 1.0%. In March 2022, the MPC voted to increase the rate by 0.25% to 0.75%. 

By the end of 2024, interest rates are not going to be as low as in 2022, but homeowners could avoid paying more than necessary by avoiding their lender’s standard variable rate (SVR) when their term ends and choose to remortgage. A remortgage interest rate is likely much lower than a SVR, and with the choice of a fixed rate would lock in the rate for peace of mind.

Choosing a remortgage is encouraged by experts. Avoiding a SVR usually saves money. There is little reason to try and wait for lower rates when there are already low rates available due to the competitive lending market. The recent MPC meeting and inflation report could motivate remortgage lenders to bring back some of the lower interest rate deals recently pulled. Choosing to wait out a remortgage and pay on a higher SVR could find the lending market less favorable at the end of summer compared to now.

Since saving and financial security are normally the strategies, taking a hard look at available remortgage deals is encouraged. Gathering quick remortgage quotes to review and compare is easy to do online when visiting a remortgage broker as they will offer quotes from a variety of lenders. They sometimes have exclusive deals from lenders not offered directly to borrowers. Quotes could also be gathered by going from one lender website to another.

The outlook for the economy is now revealed in the recent inflation report and the MPC decision for the base rate. It is up to those impacted by the information to make the best financial choices possible. For homeowners, it depends on when a remortgage is possible and needed. Most experts would agree that any homeowner could benefit from remortgage shopping for the information is valuable in creating a smart plan whether it is for the near future or later.