Alex Sharp of GAM Home Loan Specialists writes about the impact of the recent base rate change.
The UK mortgage market is currently experiencing significant shifts including the recent Bank of England’s (BoE) decision to reduce the base interest rate to five per cent.
This move, aimed at stimulating economic growth and easing financial pressures on households, has considerable implications for both existing mortgage holders and potential homebuyers.
In its most recent Monetary Policy Committee (MPC) meeting, the Bank of England opted to reduce the base rate from 5.25 per cent to 5.0 per cent. This decision is likely taken due to easing inflationary pressures, and the need to support household finances.
The reduction in the base rate has a direct impact on mortgage interest rates, particularly if you are on variable-rate and tracker mortgages.
GAM Home Loan Specialists is run by Gary (left) and Alex Sharp (image supplied)
Variable-Rate Mortgages: If you have a variable-rate mortgages, where the interest rate can change at the lender’s discretion, you are likely to see a reduction in their monthly payments. Lenders often adjust their standard variable rates (SVRs) in line with changes to the base rate, meaning the recent cut should bring you some relief.
Tracker Mortgages: If you have a tracker mortgages, which are directly linked to the base rate, the reduction will automatically result in lower interest payments. This makes tracker mortgages particularly attractive in a falling rate environment, as the savings are passed on to you without delay.
Fixed-Rate Mortgages: If you are on a fixed-rate mortgage, the immediate impact is less clear. Fixed-rate deals are set for a specific term, usually between two to five years, and are not affected by changes in the base rate during this period. However, banks have reduced their mortgage rates which you could benefit from when you ReMortgage.
For potential homebuyers or those looking to re-mortgage, the current environment presents both opportunities and challenges.
The reduction in the base rate makes borrowing cheaper, potentially increasing affordability and making it easier to secure a mortgage.
However, this can often lead to increased demand in the housing market, therefore more competition for property.
The current environment presents both opportunities and challenges (image by James Smith)
One key piece of advice is that if you have a Mortgage Offer secured with a bank or mortgage lender then you can contact them to ask if there is now a lower rate available to you.
Just because you have secured the mortgage offer does not mean you are tied into it.
For example, if your current mortgage fixed rate period expires on 30/11/2024 and you have a 5.09 per cent fixed rate lined up to start on the 1/12/2024 then you can speak to your bank to see if there is a lower rate than 5.09 per cent available.
This is also the case if you are buying a new property. If you are using a Mortgage Adviser they will guide you through the process.
The lower rate will mean lower monthly payments.
It GAM HLS we are checking the rates regularly and making sure our clients are automatically on the best rate available.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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