For anyone on a tracker or variable mortgage this means rates will remain the same, it will also offer some reassurance for anyone looking at taking out a fixed-rate mortgage.
However, with seven of the nine-member Monetary Policy Committee at the Bank of England (BoE) voting for a ‘hold’ on the Base Rate and two preferring a 0.25% increase it is clear a cut to interest rates is now unlikely for some time.
Indeed, the committee said despite the recent fall in inflation to 2.8%, it expected it would rise again due to the knock-on effect of energy price rises which can also impact businesses and wages.
Susannah Streeter, chief investment strategist for Wealth Club, said: “Policymakers are playing a game of patience, slowly shuffling their latest cards of data and taking time to deliberate where inflation will land next.”
She added: “Another interest rate hike is still being pencilled in on financial markets, but forecasts of multiple rate hikes have been reined back.
“Policymakers are staying cautious, anxious not to tip the economy into reverse but remaining wary about keeping a lid on unruly inflation.”
What will happen to your mortgage now?
The Bank of England base rate provides a benchmark for the cost of borrowing and this will therefore impact the cost of mortgages. How it impacts your mortgage depends on the type of deal and how far into the deal you are at the present time.
Tracker mortgage borrowers
A hold on interest rates is most significant for those on tracker mortgages. Whilst you will not see a cut to your repayments, you will not experience a hike either. There are predictions of one more interest rate hike this year, however, and with two BoE policymakers voting for a 0.25% rise today, it could be worth preparing for the inevitable.
David Hollingworth, associate director at L&C Mortgages, said tracker mortgages had gained popularity in recent times as more borrowers opted to gamble on interest rates remaining low.
He added: “Of course, there’s no guarantee and markets have still priced in the possibility of higher interest rate rises, so borrowers should consider how well they can cope with payments rising.”
Fixed rate mortgage borrowers
If you are currently locked into a fixed rate mortgage which is not due to end in the next six months, today’s decision will have no impact on your repayments. For those with a deal expiring soon, there’s more advice below.
Borrowers looking for a new mortgage deal
A hold to interest rates will offer some reassurance to buyers or borrowers, explained Ben Thompson of Mortgage Advice Bureau, because it provides a sustained period of stability. Indeed, the next interest rate decision is due on 30 July.
But he also said its research had found that 41% of prospective buyers were waiting for a ‘sign’ before taking the next step, and this period of stability could provide some of the reassurance they’ve been looking for.
Nevertheless, he advised anyone coming to the end of their current deal to review your options early.
“While many are coming off historically low fixed-rate products and may face higher repayments, lenders continue to compete for business, and there are competitive deals available for those who are well prepared,” he said.
“As always, seeking expert mortgage advice remains crucial to securing the most suitable deal for your circumstances.”
First-time buyers and movers
Thompson said for first-time buyers, a hold provided greater confidence when budgeting for mortgage repayments, and it may encourage more people to move forward with their homebuying plans.
But for those stepping onto the property ladder or homeowners looking to make their next move, seeking advice from a broker is advised.
This is especially true for anyone weighing up whether to go for a tracker or wondering whether to fix for a short or long term.
When it comes trackers, Hollingworth advised they are better suited to those with some flex in their disposable income.
“Trackers are more widely available without any early repayment charges though, so it does at least allow an exit route if rates take another turn and climb steeply,” he explained.
But he thought most people will be looking for the security of a fixed rate. In recent weeks prices have come down on fixed rates, which are set based on swap rates rather than the BoE Base Rate.
Sarah Tucker, mortgage expert, HomeOwners Alliance, explained: “We’ve seen fixed rates falling in recent weeks and swap rates – which are a strong indicator of lenders’ funding costs – have continued to fall this week following the US-Iran peace deal.
“But what happens next with fixed rate mortgage pricing will depend largely on what the markets think is next for interest rates. So all eyes will be on the voting split and commentary from the Monetary Policy Committee for clues about the direction of future rate cuts.”