Base Rate Cut to 4.5%: What It Means Mortgages

The Bank of England has cut the Base Rate by 0.25% to 4.5%. This decision follows two cuts in 2024, after holding the rate at 4.75% in December. As of December, inflation was at 2.5%.

Impact on Mortgage Rates

Recently, mortgage rates have seen slight increases, despite some lenders cutting rates. Over the past week:

• 2-year fixed rate mortgages: Average rate fell by 0.02% to 5%.
• 5-year fixed rate mortgages: Average rate is now 4.79%.

What This Means for Your Mortgage

• Fixed-Rate Mortgages: Payments won't change until the end of the deal.
• Tracker/Variable Rate Mortgages: Payments will decrease with the Base Rate cut.

Preparing for Rate Changes

• Mortgage Calculator: Estimate how much you could borrow.
• Mortgage in Principle: Get closer to a mortgage offer.
• Mortgage Charter: Launched in July 2023 to help those struggling with payments or nearing the end of fixed-rate deals. Borrowers can lock in new deals up to six months before their current rate ends.

What to Expect Next

House hunters are expected to take the opportunity to purchase properties before 31st March 2025, when the new Stamp Duty rates take effect.

The Bank’s Monetary Policy Committee will decide on the next interest rates on 20 March 2025. While rates have started to decrease, it's unlikely they'll return to the lows seen in 2021.

Overall, while the base rate remains at 4.5%, economic indicators such as rising inflation and sustained wage growth suggest that borrowers and investors should stay informed about potential future changes in interest rates.