Loyalty is a virtue which we would like to see more of in the world, but alas, it has no place in our financial world as it once did for personal mortgage lenders. Long ago one might have had a lengthy relationship with the lender that said yes to their first mortgage. In helping a homeowner find their way onto the property ladder, the lender would likely have a lifelong customer and perhaps even generations of customers. However, holding onto that mindset could be costing homeowners money in today’s world and having them paying more than necessary.

It is the last weekend of the month of October. This is an obvious marker that the holiday season is coming quickly upon us and a new year will be a part of it. The year will close out with more hope for a better economy ahead, with at least most if not already feeling some relief will soon, as inflation has dropped below the target rate. Wage growth, lower inflation, and the expectation of cheaper borrowing costs are promised ahead. However, to make the most of opportunities available now and into the next year, it will require action and for homeowners the motivation to save should inspire them to take advantage of current opportunities.

With all the talk about the unexpectedly low remortgage and mortgage rates available from lenders due to the competitive lending environment that was developed around the expectation of the first MPC rate cut since 2020, the discussion is now on rate increases. Yes, increases. The expectation of the first cut spurred lenders to reduce their rates to attractive levels that could not be ignored by borrowers. After the Bank of England’s Monetary Policy Committee (MPC) voted to cut the standard base interest rate in August, rates were slashed further. Some fell below 4% despite the base rate reaching just 5.0% after the 0.25% reduction. 

Homeowners are taking advantage of the same lower cost borrowing that is fueling demand in the UK housing market. The opportunity to remortgage is not being pushed aside in favor of being transitioned to their lender’s standard variable rate (SVR) to await lower rates in which to choose a new deal. The expectation of lower rates is due to the forecasts of another cut to the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPS). While there is normally a seasonal boost in remortgage lending during the autumn, it is likely the ability to obtain an lower than expected remortgage interest rate is part of the motivation to seek a new deal.

For the first time since 2021, the UK inflation rate has fallen below the target rate set by the Bank of England of 2.0%. The current inflation data which was released for the twelve months to September was reported at 1.7%. This is a sharp decline from the previous inflation report of the twelve months to September of 2.2%, slightly above target. The drop below target rate was expected to occur, but not until next year. The earlier than expected and sharp decline has given life to a strong expectation for the Bank’s Monetary Policy Committee (MPC) to cut the standard base interest rate during their next meeting in November.

The Office for National Statistics (ONS) reported the sixth month of annual increases for the average UK house price. In the year to August, the average house price had risen to £293,000 or 2.8%. The increase in demand in the housing market has been credited to lower mortgage interest rates and growth in the supply of available properties on the market. The expectation is for a continued increase in the UK average house price throughout the year as the cost of borrowing could decline even further.