Base Rates and Mortgage Rates
Posted on 5th November 2024 at 10:28
Will the Bank of England reduce the base rate again?
The Bank of England meet again on 7th November and much has been written about whether they will vote to reduce the base rate following the last cut in August this year.
Since that date the mortgage market has seen a price war amongst lenders, the lowest mortgage rates for 3 years, subsequent rate rises and inflation below the target rate of 2% so what is likely to happen in the short to medium term and how will this effect all of us with mortgages and those looking to get on the property ladder.
Following the rate cut in August the governor of the Bank of England, Andrew bailey, stated he expected there to be gradual reduction as they took a cautious policy towards lowering rates. A few weeks later and his view appeared to change as he told the Financial Times that a more aggressive approach could be adopted however the September meeting saw the board opt to keep the base rate at 5% but it is widely expected that the base rate will be cut by a likely 0.25% in November.
With inflation in September down to 1.7% there is cause for optimism around a further base rate cut following in December although the weight of vote in November may be give a clearer insight into the likelihood of that happening.
Analysts at Goldman Sachs, the Wall Street investment bank, have predicted that the base rate will fall to 2.75% by November 2025 however this would mean 9 consecutive rate cuts of 0.25% by the Bank of England from November onwards and this would seem extremely unlikely. A more likely approach appears to have been taken by the money markets that seem to be pricing in a drop to 3.5% by this time next year. Either way it would be good news for borrowers.
Whichever of the experts prove to be right remains to be seen however it appears the public are also convinced that they will be falling. Buyer confidence has certainly been returning to the market with Zoopla recently stating that current sale agreed properties is 26% higher than this time last year although Santander announced that 60% of the mortgages, they are lending are on 2 years fixed deals with just 25% being over the longer 5 year term. This is a significant shift from previous where 60% of their lending was over the 5-year term.
As always, we love to hear your thoughts and are happy to answer any questions you have by either dropping us a message, calling 01452 260993 or emailing enquiries@rbwalters.co.uk
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