Interest rates held at 5.25% by Bank of England: What does this mean for mortgage rates?

The Bank of England (BoE) has held interest rates at 5.25% on Thursday 20th June 2024.

In the UK, there’s growing interest in a possible base rate cut after inflation fell to 2% in May. While two members of the Bank of England’s Monetary Policy Committee voted for a 0.25 percentage point cut to 5%, the remaining seven members opted to keep the base rate unchanged. Since December 2021, the BoE has raised the base rate 14 times to tackle high inflation, which in recent months has been on the decline.

Over in the States, US inflation was higher than expectations earlier this year, potentially influencing UK interest rates. However, the latest US data shows a more positive trend, with inflation falling to 3.3% in May.

How has this impacted mortgage rates?

As for mortgage rates, variable-rate holders may find relief, as a base rate increase typically leads to higher rates. Although mortgage rates initially dropped at the end of 2023, recent US inflation surprises caused expectations for a BoE base rate cut to shift.

Currently, the average five-year fixed-rate mortgage stands at 5.03%, according to Rightmove. While rates may decrease later this year, it depends on various factors, including inflation and swap rates.

If you’re considering buying a home, be aware that prices are expected to rise if mortgage rates ease. This is due to the fact that people can afford to loan more money from the bank making these properties more accessible to investors and individuals looking to buy their first home.

Conclusion

No one can be certain the future of inflation and interest rates; more often that not, predictions are wrong and external factors can change causing sharp increases and falls in them. Speaking to a qualified adviser can help guide you through investment opportunities that can work well in this environment and how to adapt and take advantage of the current interest rates.