Households are braced for even more mortgage pain as interest rates are set to be held at their 15-year high of 5.25 per cent yet again on Thursday.
Economists widely expect the Bank of England‘s Monetary Policy Committee (MPC) to vote for a rate hold, which will mean that those on tracker and variable mortgages see no reduction in their monthly costs.
The average standard variable mortgage rate sits at 8.18 per cent, costing £1,567 per month for someone with a £200,000 mortgage on a 25-year term.
A 0.25 percentage point reduction would cut a bill of this size by around £33 per month, or just under £400 per year.
However, experts say the first rate cut will probably not come until May at the earliest.
Ruth Gregory, deputy UK chief economist at Capital Economics, said the Bank will “almost certainly keep interest rates unchanged”.
Sanjay Raja of Deutsche Bank Research said he predicted the first rate cut to come in May, but added: “Conviction levels have fallen, especially with little signaling from the MPC on when rate cuts could begin.”
This uncertainty over when interest rates will fall has also fed into higher fixed mortgage pricing in recent weeks.
The average five-year fixed rate mortgage is currently at 5.35 per cent, which is up from 5.3 per cent at the end of February, according to financial analytics firm Moneyfacts.
For a borrower with a £250,000 mortgage, this would mean monthly payments of £1,512 instead of £1,487 – which is £25 per month or £300 per year more.
Several lenders, including Halifax, Santander and NatWest, announced increases in rates last week, and although the rate of price rises has slowed, they have been followed by TSB, which is upping rates by up to 0.25 percentage points for new and existing customers from Wednesday.
A fall in inflation on Wednesday could lead to rates falling, but experts have said that banking on this is not a good idea.
“The mortgage market can be unpredictable, but waiting for the right moment to secure a deal is not a viable strategy,” said Nick Mendes, of John Charcol brokers.
He said the mortgage market needed “stimulation” before lenders started to reduce rates.
“Financial markets will be paying close attention to the [Bank of England] Governor’s notes and the split between the voting following a three-way split in the last MPC meeting, but the MPC are unlikely to pull a shock decision and cut rates,” he said.
There have also been warnings that more mortgage customers are facing problems with their bills.
Missed payment rates among mortgage holders have returned to levels seen at the height of the cost of living crisis, according to data from consumer group Which?.
In the past month, 8.1 per cent of mortgage holders missed essential payments such as housing, utility bill, credit card or loan payments.
This is the third highest level Which? has recorded for mortgage holders since it started tracking it in April 2020 – only slightly lower than the high of 8.5 per cent in both March 2023 and November 2023.
Rocio Concha, Which? director of policy and advocacy, said: “It’s very worrying that missed payment levels are still so high – with almost one in 10 mortgage holders missing a household payment in a single month. We’d encourage anyone who’s struggling to seek free debt advice and reach out to their mortgage provider or landlord for help.”