The latest announcement from the Bank of England (BoE) on 21st September saw the Bank Rate being kept at 5.25% after 14 previous rises [1]. The interest rate has been rising since December 2021 in a bid tackle high inflation.
The latest Monetary Policy Committee (MPC) report stated that projections suggesting that a Bank Rate at just under 5.5% over a three-year forecast period could bring inflation down to 2% by 2025 Q2[2].
We’ll have to wait and see if that is indeed the case but what does that mean for now?
How high is inflation?
At the moment, inflation is 6.7%. This is a slight decrease from 6.8%, which is what it was during the time of the last MPC meeting in August.
As inflation is coming down, this could also have played a part in deciding to hold the Bank Rate at the present level. While a decrease in inflation is positive, it doesn’t mean items are getting cheaper – just that their prices are rising at a slower rate.
What does a held Bank Rate mean for mortgages?
If you are on a Standard Variable Rate (SVR) mortgage or a Tracker mortgage, you’ll no doubt have noticed your payments increasing with each interest rate rise. As the rate is staying at the same level until the next review, there will be no mortgage payment rises until at least then.
It’s important to note that six million households are on fixed-rate mortgages, 800,000 of which are due to end this year [2]. If you secured your rate when interest rates were historically low, you could be looking at a (potentially large) rise in your mortgage payments.
Will fixed-deal interest rates come down with a steady Bank Rate?
It is difficult to say exactly where mortgage deals will go in the future, but we have already seen some evidence of fixed-deal rates decreasing since the last MPC report.
High street lenders such as Barclays, TSB and Halifax have cut selected fixed-deal rates, reducing them by between 0.12% and 0.5% [4]. Virgin Money, MPowered Mortgages and some other lenders have also made reductions to selected deals.
While this doesn’t help those on fixed deals that are currently higher than existing average rates, it could be significant for those on SVR or Tracker products that are considering switching to a fixed-rate deal, those whose fixed deals are coming to end or for first-time buyers who may want a fixed product.
Should I fix it now?
This question depends very much on your personal circumstances. If your current term is coming to an end and you want to secure a new deal now, you can begin the process up to six months in advance of your fixed deal ending.
Those on SVR and Tracker products may also be able to fix it anytime, depending on the product and their circumstances.
If you’re looking to fix your mortgage, we would always recommend speaking to a qualified mortgage broker, with access to the whole market to search for the best deal for you.
