In 2024, more than one and half million homeowners were to come to the end of their mortgage terms according to UK Finance. Some of those at the expiration of their mortgage term have failed to remortgage to secure a new deal and were moved to their lender’s standard variable rate or SVR. The reasons could be varied, but it might be guessed that some may not have understood the benefits of a remortgage, while others could have chosen to wait for cheaper interest rates. The choice to wait was likely helped along by the forecasts of cuts to the standard base rate by the Bank of England’s Monetary Policy Committee (MPC). 

The base rate rose from December 2021 to August 2023. In the less than two-year period, the MPC voted during every consecutive meeting to increase the base rate, and it climbed from almost zero at 0.1% to 5.25%. From September 2023 to July 2024 the majority vote by the MPC was to hold the rate steady. The burden of a sixteen-year high base rate along with higher inflation that at one point reached double digits and a forty year high has been a financial hardship on most. It would be no surprise that homeowners in need of a remortgage would be seeking out the greater savings possible with a lower interest rate.

The first reduction to the base rate in over four years happened last month during the MPC meeting on 1 August. The vote was 5-4 for a cut of 0.25% taking the 5.25% sixteen year high to 5.0%. Much of the reduction was due to the long-term hardship on the economy and on borrowers, and that inflation was reported to have reached the target rate of 2.0% for two months in May and June. In the August report, it had grown to 2.2%.

The next inflation report is due on 18 September, the day prior to the next MPC meeting. There is little worry if the report shows inflation climbing since the MPC has noted inflation could rise to 2.75% by the end of year. It is expected inflation would creep above target and there will be no reversal of the latest rate cut if it does. However, how much inflation rises could cause a sense of caution in the MPC and another cut to the base rate could be put off until 2025. There remain only three MPC meetings for 2024 with one scheduled for September, November, and December.

Those hoping for lower borrowing rates need not wait on the MPC. Lenders expecting that once the MPC did choose to cut the base rate that borrowers would be optimistic and return for lending, especially in the housing market, began to cut their rates weeks before the MPC gathered to vote.

There are currently lending rates available that would be reflective of a second cut by the MPC that has yet to happen. Last week there were many top lenders cutting their rates in anticipation of this week’s meeting of the MPC on Thursday. There are mortgage rates below 4.0% available, though those are reserved for borrowers with low loan to value or LTV ratios. However, there are definitely cheaper rates to be found for both mortgages and remortgages than months or even weeks ago.

Remortgage offers have not been as drastically cut as mortgages, but they have been catching up to the savings levels offered to home buyers. It is not known how long the competitive environment will last and how far below the base rate lenders are willing to go to attract new customers. In a short period, the best deals could disappear if demand is met or if for some reason the optimism in the economy is shaken even slightly.

Therefore, with rates already at or below the base rate, and so many unknowns at play that could stifle the competition between lenders, borrowers could do well to take a hard look at what advantages are available in securing a mortgage or remortgage now rather than waiting on lower rates that could already be available and might disappear should caution take over where optimism once existed in the expectations for the near future of the UK economy.