Today, the Bank of England announced the first Base Rate cut of 2025. Will it decrease further, and what will this mean for mortgage rates?
Following today’s Monetary Policy Committee’s meeting, the Bank of England (BOE) has decreased the Base Rate (BBR) to 4.5%.
The BOE held the BBR at 4.75% in December due to inflationary figures released by the Office of National Statistics (ONS). These figures showed that inflation rose 2.5% in the 12 months to December. Whilst this was below market forecasts, it still shows an upward trajectory from the BOE target of 2%.
Today’s announcement is no surprise to the money markets, and the overall expectation is that BBR will decrease twice more to 4% in 2025. Although some institutions predict BBR to fall below 4%, this is highly unlikely due to inflation and wider economic activity.
Will mortgage rates come down further?
It’s important to remember that while the Base Rate does not directly impact fixed mortgage interest rates, SWAP rates do. Therefore, we don’t anticipate a surge in mortgage rate reductions following today’s announcement.
SWAP rates are what lenders pay to other financial institutions to borrow fixed funding for a specific period (e.g., 2 or 5 years). Lenders use this cost to price their mortgage products to allow for profit margins. BBR is factored into SWAP rates, allowing lenders to price their product sets accurately before Base Rate changes.
What’s most interesting for landlords is that the latest 2-year (4.007%) and 5-year (3.85%) SWAP rates have just a 0.15% difference. This minimal margin indicates that mortgage rates over the next 2 and 5 years will settle at around 4%.
Your next mortgage
It’s essential to discuss your mortgage options with us. As a whole-of-market mortgage broker, we will search all available rates to find the best deal for your circumstances. Our established relationships within the industry mean we can often secure exclusive or limited edition deals you wouldn’t find elsewhere.
Remember that many lenders allow you to secure a rate up to 6 months in advance and move onto a lower rate if it becomes available before you complete. This gives you peace of mind that you have the best deal, no matter whether rates go up or down.
To discuss your options, call us on 0345 345 6788 or submit an enquiry here.
