The Bank of England’s Monetary Policy Committee voted by a majority of 8-1 to leave the base rate unchanged at 5% in September, although markets are still pricing in further cuts before the end of the year.
Positive labour data published last week may have contributed to the decision to hold rates this month, with unemployment and inactivity both having fallen over the past quarter, whilst employment has risen.
Although the economy flatlined again in July, wage growth remains ahead of inflation, so the next rate cut is only likely to happen once there is evidence this has further slowed. Average weekly earnings in the three months to July were 5.1% higher than a year earlier, according to the Office for National Statistics (ONS), although this is the lowest increase for two years and compares with 7.8% wage growth in July last year.
The Committee meets next in November, and if growth continues to ease, it is expected to reduce rates to help bring down borrowing costs.
What this means for your mortgage
The good news is that even though rates have been held this month, cuts expected later this year are already being priced into fixed rate mortgages, with lenders continuing to trim rates in recent days.
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 prove to be a costly mistake, as no-one knows exactly when rates will fall.
The benefit of arranging your mortgage in advance is that if anything unexpected happens to push rates back up, you’ll have peace of mind that 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. L&C’s Rate Check service allows mortgage customers to review their deal at any point before their switch completes, and to transfer to a new deal if a cheaper option becomes available.
If you’re approaching the end of your current mortgage deal, it’s therefore worth seeking advice on the options available to you sooner rather than later. You can usually secure your next mortgage deal up to six months in advance but it makes sense to start at least 3 months before the deal ends.
