On Thursday, the expected occurred. The Bank of England’s Monetary Policy Committee (MPC) increased the standard base interest rate, which made this meeting the fourteenth consecutive gathering that resulted in a rate hike. The rate was raised by 0.25% to 5.25%, which was less of a surprise than at the last meeting in which the rate was more assertively raised by 0.50%. The current rate is now at a 15 year high, and while the rate was increased, the committee was divided about the action.

The majority vote of the MPC was 6 in favor of the 0.25% increase, while two members voted for a 0.50% rate hike to keep inflation moving toward target more rapidly, and one member voted to keep the rate steady.

The MPC also released their more optimistic forecast on inflation with an expectation of a decline to 4.9% by year’s end. Inflation would still be higher than in other top economic countries and would be more than double the Bank’s target rate of 2.0%. The forecast should serve as a warning to borrowers, for if the forecast is off and inflation slows its descent, a more aggressive stance could be taken quickly by the MPC. It could mean a quick shift to a higher peak rate or a larger increase by end of year or more increases to come.

So, when does the MPC expect inflation to reach a target of 2.0%? According to the recent report, inflation is due to decline to 2.5% by the end of 2024 and dip below target rate by the second quarter of 2025. 

Inflation is a great concern to economists and the government, and while it is descending toward target, the slow and steady pace to reach target by 2025 should be a wake-up call to borrowers expecting the base rate and lenders to bring rates back to the levels seen at the end of 2021 or through the first part of 2022. It is very unlikely. Instead, rates are going to climb higher before reaching a steady pace and then they might not decline but simply remain to hold inflation down.

In December 2021, the first of the fourteen rate hikes of the MPC was voted for and the historically low rate of almost zero at 0.1% increased by more than double to 0.25%. The increase was a surprise since most experts did not expect the rate to change until the first quarter of 2022. But the rate hikes began, and thirteen consecutive meetings to follow took the rate to its present level of 5.25%. That is a considerable change in less than two years. 

The difference in the Bank’s rate and therefore lender rates amount to a substantial amount of money for borrowers. That is why there are those looking beyond the state of the economy and seeing the state of UK households. 

Experts are warning homeowners to consider remortgaging. It is likely the most accessible and straightforward path to saving money overall.  Remortgaging will not bring a homeowner to a choice of the historically low rates of before, but for those homeowners coming to the end of their term, it can keep them from paying more than necessary.

At the end of a mortgage term, the homeowner has the choice to allow the lender to move them to their standard variable rate (SVR) or remortgage. The SVR is normally higher than what could be found with a remortgage. By skipping the SVR and choosing a lower interest rate remortgage the homeowner will be saving money. Choosing a fixed rate remortgage will lock in the rate and shield the homeowner’s budget from further rate hikes saving them even more in the long run.

Remortgage shopping is fast and easy when done online. It should be noted that shopping with other lenders and letting go of loyalty to the current lender is a good strategy. The best all-around remortgage could be with a new lender and not the current one. Finding that best remortgage is even more important now than in years past. 

By shopping online, the homeowner has access to quotes quickly by just visiting a website. A remortgage broker website could offer up many quotes from a variety of lenders and possibly even exclusive deals from lenders not offered directly to borrowers. The homeowner could also go website to website of remortgage lenders to gather quotes to review and compare.

The base rate has risen to a high not seen in over a decade and a half. It is not likely to remain there long as the MPC has more work to do against inflation. Homeowners nearing the end or at the end of their mortgage term should consider remortgage shopping. Those already moved to a SVR certainly have savings awaiting them that are going unclaimed by not remortgage shopping. 

More rate hikes are on the way, and inflation according to experts will be with us until 2025. That is a lot of repayments between now and then, and for a homeowner looking to make the most of opportunities to save, shopping for a remortgage is the top priority to do so.