Next week is the gathering of the Bank of England’s Monetary Policy Committee (MPC). The meeting will be on Thursday, 19 September and will follow the previous day’s release of the most recent inflation data. The expectation is for another rate cut to occur in 2024, and if it happens this month it would mean two consecutive meetings with a reduction. There will not be a meeting held in October, so after the September meeting, the next opportunity for a majority vote by the MPC to cut the base rate will be in November or December. The possibility of a second-rate cut has pushed some hopeful home buyers and homeowners in need of a remortgage to wait for the possibility of lower interest rates.

For borrowers, the interest rate determines the cost of borrowing. The higher the rate, the more costly it is, while the lower the rate, the cheaper the cost. This is why the focus on a loan is the level of the interest rate the lender is offering. Often there are other parts of borrowing that are overlooked but should certainly be considered.

For instance, the lowest interest rate offers often have the highest fees, while a loan with a slightly higher interest rate could have a much lower fee associated with it. Considering the overall cost of a loan and not just the interest rate is an important part of smart borrowing.

There are of course other parts of a loan that are as important as the cost of borrowing, such as the type of loan and the term length. For homeowners choosing a remortgage, the ability to convert built up equity in their property into cash with a new deal could be an important criterion when choosing a remortgage deal.

When considering a loan, whether it is a first time home buyer mortgage or a long time homeowner’s third remortgage, the type of loan, the length of term, to cash out equity or not, and other options can quickly be decided at times, what can keep a borrower up late at night is whether or not they should borrow now or wait for a greater opportunity to secure a lower interest rate.

Choosing whether to wait or not would be much easier with the help of a future telling crystal ball, but since that is not possible, one must take into consideration forecasts, expectations, and patterns in the economy to determine if the best interest rates are the ones available now. Changes in the near future could push interest rates down or up and could do so very quickly. 

In March 2020, the MPC voted to cut the standard base interest rate to an historic low. In over three hundred years, the base rate had never been as low. At 0.1%, it was as close to zero as it had ever been, making borrowing cheaper than anyone alive had ever seen it. Lenders offered their own historically low rates, and it changed how people were able to buy in the housing market.

First time home buyers could afford to look beyond starter homes, homeowners could seriously consider moving home for a larger property or to downscale or even perhaps buy a holiday home. The opportunity to borrow so cheaply was not easy to overlook, and few did. Those that had borrowed only two years prior could never have forecasted the world would be plunged into a global pandemic and interest rates would plummet to the near bottom in an effort to save the economy.

How the base rate would quickly evolve again was just as unpredictable. In December 2021, the MPC began to raise the base rate. The first increase left the base rate still extremely low by any standard, but it was more than doubled when the vote pushed it from 0.1% to 0.25%. Every consecutive MPC meeting resulted in a rate hike until September 2023 when the vote was to keep the rate steady at 5.25% to combat inflation. There it remained, meeting after meeting until last month, when the rate was cut by 0.25% to 5.0%, making it the first reduction in over four years.

No one knows what unknown circumstance could drastically impact the current lender rates. Especially now that lenders have established an incredibly competitive lending market. Despite the base rate sitting at 5.0%, lenders have offers in mortgaging near and in some cases below 4.0%. Remortgage offers have not been as low as mortgage deals, but they are quickly catching up.

There is a possibility the MPC could vote for a rate cut this month, or if not, maybe in the final months of the year. They could also decide to hold the rate steady and consider 2025 a better time to test the steadiness of inflation. 

Waiting for lower interest rates could have rewards, there could also be consequences if lenders choose to be less competitive as the hope for a rate cut by the end of year fades.

The decision to buy or to remortgage now or wait out for lower interest rates cannot be assured by any expert offering advice. A home buyer or homeowner must weigh the personal financial gains that are guaranteed against possible losses that might or might not occur later. 

What is factual now is that lenders are offering attractive deals with many below the base rate of 5.0%. Also, considering the possible next base rate would likely be another reduction of 0.25% to 4.75%, and some lenders are at or below 4.0% offerings, it might be that one doesn’t have to wait. The best deals are likely available already.