No, this isn’t a film production-themed article (although we do provide mortgages for actors and entertainment industry mortgages). In fact, it’s an interest rate cut-themed article, following the Bank of England’s (BoE) decision to cut the base rate from 4.75% to 4.50%.
The move, which takes the base rate to the lowest it’s been since summer 2023, will be welcome news for those looking to apply for a mortgage, as the downshift is likely to lead to cheaper UK mortgage rates as the cost of borrowing falls.
But what does this mean in the short-term and long term?
A Guildford mortgage broker’s take
If you’re currently on a tracker mortgage, then the 0.25% reduction will come into play immediately.
For the 600,000 or so people who are on a tracker mortgage – and who might well be on one deliberately in order to attempt to play (and win) the mortgage rates game – then the BoE’s decision will be very welcome.
However, on the assumption that an average tracker mortgage rate is typically between 0.10% and 1.20% above the base rate, this would still be higher than the best fixed rate mortgages in the UK right now. In fact, our team of mortgage brokers in Guildford can currently secure fixed rate mortgages that are significantly lower.
However, those currently on a tracker mortgage are quite likely to be on it in the hope that rates continue to fall, which takes us onto our long-term view.
Will interest rates fall further?
Our team of Surrey mortgage advisers collectively agree that the base rate will continue to fall, mainly on the basis that whilst inflation is dramatically lower than it was in October 2022, when it nudged over 11%, at 2.50% it’s still above the 2% target.
As to when and how quickly it will fall is anyone’s guess. Not only that, but UK Finance, the financial services trade association, predicts that 1.8 million people will see their fixed rate mortgage deals come to an end this year. This means that those who may be used to 2% fixed mortgage rates are likely to be in for a shock as rates of 4% or more have now become the norm.
If you fall into that camp, then, broadly speaking, you have two options. Option one could see you apply for a tracker mortgage in the hope that the base rate continues to fall and, with it, your mortgage rate. Just remember that right now, the tracker rate is still likely to be higher than some of the best fixed rate mortgage deals currently out there. Option two is simply to get the best fixed rate mortgage deal today on the basis that nobody knows what’s around the corner – even more so in these politically and economically precarious times.
It’s also worth remembering that it’s not just the BoE’s base rate that determines mortgage rates. Swap rates do, too. Let’s say that the base rate has fallen to 3.50% by the end of 2025, but swap rates have increased significantly. In that scenario, fixed rates mortgage rates could, in theory, be higher than they are now.
Next steps
So, should you get a tracker or fixed rate mortgage? And should you continue to wait for further interest rate cuts before applying for a mortgage? The answer is simple. Get in touch with our team of Guildford mortgage advisers, who can help you decide the best mortgage path for you.
To find out how the Bank of England’s base rate cut might affect your mortgage application, contact Complete Mortgages’ team of Guildford mortgage brokers on 01483 238280 or e-mail info@complete-mortgages.co.uk.
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