After weeks of speculation that we might see one more interest rate reduction in December, the Bank of England’s Monetary Policy Committee has voted 6-3 in favour of leaving the base rate at 4.75%, with 3 members voting for a cut.
Since the last meeting, inflation has increased to 2.6%, and the bank expects it to continue rising slightly in the near term. It will likely want to see evidence that inflation will be steady, at or close to the government’s 2% target before it will start reducing rates.
It can vary but forecasts generally expect rates to fall with current expectation suggesting there could be three or four rate cuts over the course of 2025. However, the Bank’s outlook remains cautious and expects that reductions will be gradual. It remains concerned that inflation could be sticky for a range of reasons such as tax increases on employers, which are due to come into effect in April 2025.
Homeowners and borrowers will be hoping that a cut may come sooner rather than later, although this is by no means guaranteed.
Don’t delay mortgage decisions
Although it might be tempting to delay remortgaging or to wait until the base rate starts falling before you start your mortgage search, this could end up being a costly decision, especially as no-one knows exactly when rates will fall.
Mortgage rates have ticked up in recent weeks, although they are now starting to stabilise and some lenders have even started to reduce their rates again. If you find a competitive deal, you may therefore decide to secure it now, as if you’re remortgaging, this will usually cost you far less than rolling onto your lender’s standard variable rate whilst you wait for rates to come down.
The main advantage of arranging your mortgage or remortgage in advance is that if anything unexpected happens to push rates up further, you’ll have peace of mind you’ve already got a lower rate in the bag. However, it doesn’t mean you’ll miss out if interest rates and mortgage rates subsequently fall. Our Rate Check service allows you to review your deal at any point before your switch completes, and to transfer to a new deal if a cheaper option becomes available.
