The Bank of England Monetary Policy Committee has today announced the 14th consecutive rise in the UK base rate, which now sits at a 15 year high of 5.25%. This one has certainly been more difficult to predict and will likely come as a surprise to some economists, who believed that we’d seen rates peak for now. The slight reduction in inflation reported in July, led some to believe that the base rate would stay put this time. Although the majority felt that with inflation still above 7%, either a 0.25% or 0.5% raise in the base rate was likely.
What most mortgage holders will be waiting to see, of course, is how today’s announcement will impact mortgage rates. NatWest, Halifax and Virgin Money all cut rates across a range of their mortgage products yesterday, ahead of today’s announcement. However, it’s important to note that lenders factor in the cost of fixed-rate deals quite far in advance, so today’s increase would likely not have influenced their decision greatly, no matter whether it increased or decreased. However, lender confidence is certainly improving generally, as last week also saw three more major lenders , Nationwide, Barclays and TSB cut many of their rates even further ahead of the BoE announcement.
Whether mortgage interest rates continue to be cut throughout the remainder of 2023 depends on wider economic circumstances, such as the future trajectory of inflation. ONS release the next inflation data in just under two weeks, on 16 August. People are, understandably, reluctant to lock in a high interest rate when there’s growing confidence that mortgage rates look to be gradually declining. However the average SVR remains high, at 8.49%, so despite the relatively modest reductions seen in both fixed and variable deals recently, it’s still absolutely worth looking at your remortgage options to avoid a high SVR.