Despite industry certainty that June would bring the first Base Rate decrease this year, it’s now highly unlikely that we’ll see any change. Here, we discuss why the outlook has shifted and what’s next for mortgage interest rates.
Many landlords had hoped tomorrow’s Monetary Policy Committee (MPC) Meeting would mark the start of a shift in mortgage interest rate pricing. Despite mortgage rates softening and settling at a new norm, a large number of property investors are still holding out for cheaper pricing before fixing a new deal.
However, despite a widely accepted consensus that tomorrow’s meeting would see the Bank of England Base Rate (BBR) drop from 5.25% to 5%, this now (almost certainly) won’t happen.
The UK’s General Election on the 4th of July has brought a degree of uncertainty to the money markets. With the key party manifestos now all published, we have a better idea of the impact the election results could have on the economy, but moving interest rates during this period would be risky.
Similarly, the news from the European elections came as a surprise to all. Following Emmanuel Macron's snap election announcement, we saw some upward movements in SWAP rates last week. International activity, such as the EU elections and ongoing geopolitical conflicts, continues to impact the money markets.
Furthermore, there is somewhat of an unwritten rule not to move rates during an election period, so it’s more likely we will see a Base Rate drop once the election results are published and the dust has settled.
When will the Base Rate come down?
According to the latest economic reports, the money markets are no longer pricing in two 0.25% decreases to the Base Rate in 2024. As a result, further easing of BBR over the next few years has also been pushed back.
August is now the earliest we expect to see a Base Rate reduction, but it’s fair to say that we will only be sure once we see the election results.
How will the election impact mortgage interest rates?
As mentioned above, we will have to wait and see how the money markets react to the election news to understand the full impact on mortgage rates. SWAP rates have been moving slightly over the past couple of weeks, but we are not expecting any drastic changes, either up or down.
For now, ensuring your property finances are in order is essential. At MFB, we offer a complimentary property portfolio review. Our expert brokers will look at your current mortgage deals, see if you can save money, and discuss the best next steps for your individual circumstances. Don’t forget that many lenders allow you to secure a new rate up to six months in advance, so even if your mortgage renewal is far off, you can secure today’s rate pricing, giving you financial security. Many (although not all) will then allow you to move onto a cheaper deal if one becomes available before you complete.
To access a FREE portfolio review, click here.
What next?
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