Mortgage and remortgage rates have been cut to incredibly attractive levels that would not have been expected with the Bank of England’s Monetary Policy Committee (MPC) having only cut the standard base rate one time so far this year. In the August MPC meeting, the committee voted to cut the rate by 0.25% to 5.0%. It was the first time the base rate had been cut since March 2020. It was a long time waited on since the expectation had been for the rate to be reduced in the start of the year, instead it took much longer. 

As inflation reached the target rate of 2.0%, lenders grew optimistic with the lower risk of lending to borrowers. They began lowering their rates before the MPC voted to do the same. Once the rate was cut by the committee, lenders created a competitive lending market and rates lowered below the standard base rate.

With the opportunity to borrow at a cheaper rate, since the old base rate of 5.25% was a sixteen-year high, home buyers have shown greater demand in the housing market. Homeowners, though not offered as low of rates as found in mortgages, have sought the current remortgage offers to save money. Those with fixed rate deals are choosing their rate to lock in rather than risk rates rising.

Rising rates would seem out of place, but they did just that earlier in the year. Lenders were expecting the MPC to cut the rate in spring, but as inflation stayed stubborn, the rate was held steady. In anticipation of a rate cut, lenders were overly optimistic and cut their rates below the base rate and then pulled those lower rates just as fast when the MPC left the rate steady to fight inflation.

Inflation has grown above the target rate and has remained somewhat unmoved at 2.2% the past few months. There doesn’t seem to be a threat of rates rising again, so the offers available now are likely to stay around even if the MPC votes to keep the rate steady in the next meeting which is in November. 

Also, the Bank’s governor recently noted the MPC could be more aggressive in cutting the base rate moving forward, and this also grounds the expectation of the current rates staying available.

Hopeful home buyers and remortgage seeking homeowners are being encouraged to shop for a deal sooner rather than later. Despite lower interest rates and the ability to save money, lenders could pull back from the aggressive lowering momentum they have been following. 

Waiting for lower rates is not suggested either, especially if someone is expecting the historically low rates that were available during the pandemic. The most likely waiting for a return to that level of interest rates are homeowners who mortgaged when they were able to secure fixed rates at 1% or 2%. At the end of their fixed rate deals, they are facing rates that are double or even triple the rate they were used to paying. 

At the end of a mortgage term, the homeowner has the option of either remortgaging, or they will be transitioned to the lender’s standard variable rate (SVR). The SVR could be attached to a much higher interest rate than what would be available with a remortgage. Also, the key feature to consider as a possible risk is a SVR being variable and subject to changing, which could have been difficult earlier this year when rates dropped and then grew rapidly.

Homeowners that came to the end of their mortgage term, encountered dropping rates and confidently went to a SVR hoping for further lender cuts before remortgaging could have been caught in a financial hardship. As rates increased, it would have pushed for a rush to remortgage and possibly having to settle for higher rates than were previously available. 

For borrowers ready to take advantage of the current savings available with lower than expected deals, it makes sense to shop now. Rates currently on the market, are reflective of the MPC having already offered a second rate cut. Rather than pay more than necessary on a SVR or miss out on the current rates available, homeowners are encouraged to shop online for a remortgage now. Gathering remortgage quotes for reviewing and comparing will help to center in on the best remortgage deal. 

Home buyers not only have lower interest rates available, but sellers ready to find a buyer with competitive asking prices that have yet to rush upward with a strong buyer demand market.

Optimism in the economy and lower interest rates are signs that this year could end on a much better note than it started, and more financial security is to be found in the benefits of shopping the lower interest rates available now.