For anyone with a tracker or variable mortgage, this means rates will remain the same, and it will also provide some reassurance to anyone looking to take out a fixed rate mortgage.
However, with seven of the Bank of England’s nine-member Monetary Policy Committee voting to ‘hold’ the base rate and two favoring a 0.25% increase, it is clear that a rate cut is now unlikely for some time.
In fact, the committee said that despite the recent drop in inflation to 2.8%, it expects it to rise again due to the indirect impact of higher energy prices which could also impact businesses and wages.
“Policymakers are playing a patient game, slowly shuffling their latest data cards and taking time to deliberate on where inflation will fall next,” said Susannah Streeter, chief investment strategist at Wealth Club.
She added: “There is still consideration of another rate hike in financial markets, but expectations of multiple rate hikes have been subdued.
“Policymakers remain cautious, careful not to tip the economy in the opposite direction, but remain cautious about keeping runaway inflation in check.”
What will happen to your mortgage now?
The Bank of England’s base interest rate provides a benchmark for the cost of borrowing, so this will affect the cost of a mortgage. How this affects your mortgage depends on the type of deal and how far along you are in the deal at the moment.
Track mortgage borrowers
Maintaining interest rates is crucial for those with tracker mortgages. While you won’t see a reduction in your repayments, you won’t experience a rise either. There are expectations that interest rates will rise again this year, and with two Bank of England policymakers voting today in favor of a 0.25% hike, it may be worth preparing for the inevitable.
David Hollingsworth, Associate Director at Real estate loansTracker mortgages have gained popularity recently as more borrowers choose to gamble on interest rates that have remained low, he said.
He added: “Of course, there is no guarantee and markets are still pricing in the possibility of higher interest rates, so borrowers must consider how well they can handle higher payments.”
Borrowers on fixed rate mortgages
If you’re currently locked into a fixed-rate mortgage that’s not due to expire in the next six months, today’s decision will have no impact on your repayments. For those who have a deal expiring soon, there are more tips below.
Borrowers are looking for a new mortgage deal
Ben Thompson of Mortgage Advice Bureau explained that maintaining interest rates will provide some reassurance to buyers or borrowers, as it provides a sustainable period of stability. In fact, the next interest rate decision is scheduled for July 30.
But he also said his research found that 41% of potential buyers were waiting for a “signal” before making the next move, and this stabilization period could provide some of the reassurance they were looking for.
However, he advised anyone approaching the end of their current deal to review their options early.
“While many are exiting products with historically low fixed interest rates and may face higher payments, lenders continue to compete for business, and there are competitive deals available for those who are well prepared,” he said.
“As always, seeking expert mortgage advice remains crucial to securing the most suitable deal for your circumstances.”
First time buyers and movers
For first-time buyers, waiting provides greater confidence when budgeting for mortgage payments, and may encourage more people to move forward with their homebuying plans, Thompson said.
But for those stepping onto the property ladder or homeowners looking to make their next move, it is advisable to seek advice from a broker.
This is especially true for anyone considering a tracker or wondering whether they should get it repaired in the short or long term.
When it comes to trackers, Hollingsworth advised that they are best suited to those who have some flexibility in their disposable income.
“The trackers are more widely available without any early payment fees, so they at least allow for an exit path if prices take another turn and rise sharply,” he explained.
But he believes most people will look for security at a fixed price. In recent weeks, rates have fallen on fixed interest rates, which are set on the basis of swap rates rather than the Bank of England’s base interest rate.
Sarah Tucker, mortgage expert at HomeOwners Alliance, explained: “We have seen fixed interest rates decline in recent weeks, and swap rates – a strong indicator of lenders’ funding costs – have continued to fall this week following the US-Iran peace deal.
“But what happens next with fixed-rate mortgage pricing will depend largely on what markets think is next for interest rates. So all eyes will be on the split vote and comments from the Monetary Policy Committee for clues on the direction of future interest rate cuts.”
