The next meeting of the Bank of England’s Monetary Policy Committee (MPC) is turning out to be a must watch event much like that of a sporting event. There are different expectations and viewpoints being shared from MPC members, experts, and government officials as to what should occur. The next meeting will likely be lively as the MPC discusses the current state of the economy and whether inflation is under control. If the meeting on 21 September results in a rate hike, it will be the fifteenth consecutive meeting to have a majority vote to raise the standard base interest rate.

The last meeting in August resulted in a 0.25% rate hike. There was not a meeting in July, and the meeting in June ended with a rate hike of 0.50%. The larger increase in June was set to keep at work against inflation through the off month and into August. The September meeting is setting up the same scenario as there is not a meeting scheduled to follow September in October. The last two months of the year will have meetings of the MPC. This is why there are some experts that are forecasting a larger increase in the base rate is necessary to keep improving the state of the economy by bringing inflation down.

The current base rate is 5.25% and is the highest it has been in 15 years. Inflation was last reported at 6.8%, down from 7.9% reported in June. The target rate set by the Bank is 2.0%, meaning that while inflation has dropped from double digits and there was a strong decline in August, it is still more than three times the target rate. 

Whether the standard base interest rate is left steady by the MPC in September, increased by 0.25% or 0.50%, the one thing that will not happen is for the rate to be cut. There are borrowers expecting rate cuts and a future downward trend in borrowing rates to occur quickly, much like the rates rose. However, the historically low rates found during the pandemic were unusual and not normal for a healthy economy. The rates found today are likely to stick and could be higher rather than lower for years to come.

The MPC meeting will certainly be interesting, and the impact of the vote could result in surprising responses from lenders. Normally, after an increase by the MPC is announced, borrowers can expect to see rapid reactions by lenders as the lower cost interest rate offers disappear from the market and are replaced by new higher rate offerings.

However, because of higher rates, borrowing has slowed. There are fewer home buyers, and those keeping the market moving are cash buyers not impacted by the interest rate hikes. The lack of demand for borrowing by home buyers has led to a competitive market that has only recently emerged.

Just this past week, lenders began offering lower interest rate offers. It should be noted that many of the rate cuts are for offers intended for those with very large deposits and great credit histories. Most seeking mortgage lending, especially first-time buyers that are likely finding saving for deposits difficult in the current economy, will still be shocked by the change in the cost of borrowing now versus two years ago and even in comparison to last year.

The difference in the cost of borrowing will keep many off the property ladder. It is also causing affordability issues for homeowners coming to the end of their mortgage term. Those that secured a fixed rate deal of an historically low interest rate two years ago and will have their term expire this year will face hundreds if not thousands of dollars more per year in repayments. This is why experts are encouraging homeowners to avoid letting their mortgage term expire without remortgaging.

If the homeowner allows the term to end without a new deal, the lender will move them to their standard variable rate (SVR). Avoiding a SVR with a remortgage could save the homeowner substantial money. Also, with a remortgage, a fixed rate could be secured to not only save more but offer peace of mind against any further rate hikes.

Homeowners looking to discover what opportunities are available in remortgaging can easily and quickly shop online. Remortgage broker websites could offer up numerous remortgage quotes from a variety of lenders. They might also have an exclusive deal from lenders that the lender does not offer directly to borrowers. The homeowner could also go website to website of remortgage lenders to gather quotes to review and compare.

There is little time left before the next MPC meeting, and the latest news about what could result from the meeting is from a member discussing the need for more rate hikes before the peak level is reached to work against inflation to reach target. The news follows the comments by others that the next rate hike could be the last needed against inflation. 

For borrowers, the time to take action is now, as rates have been cut due to competition in the lending market and due to a more favorable outlook on the economy. As quickly as that situation came about last week, it could change this week or the next, especially with the result of the MPC meeting on the 21st.