This Thursday we are expecting the Bank of England to announce a cut in interest rates. This is a step that can very greatly help homeowners with tracker mortgages. Analysts expect the central bank to cut its rate from 4.5% to 4.25%. This is the second decrease in their rate this year and the fourth since it reached its high point of 5.25% last year.
Homeowners such as Vanda, who has a torsion mortgage, would benefit from lower monthly repayments. If the Bank of England does implement the cut, Vanda could be better off by an estimated £29 per month. Almost 600,000 residential mortgage holders in all of the United Kingdom now use tracker mortgages, which immediately adjust to the Bank’s interest rate shifts.
The latest inflation data shows that rate at just 2.6% for the 12 months ending in March. This background information provides context for the upcoming announcement and decision. Consumer advocates and economists are cautioning that with a number of provisions in the bill, inflation will be increased. This is particularly the case for domestic energy prices, which jumped at the start of April. This booming inflation makes the Bank’s task difficult as it struggles to continue economic growth while containing rampant price growth.
Hundreds of thousands of tracker mortgage holders would stand to gain from one full percentage point cut. There are still some people out there who question its efficacy. Samren Reddy expressed his thoughts, stating,
“I don’t think a small decrease will be a game changer. We’re saving for the initial upfront deposit.”
Today’s mortgage market is full of indication of the strong desire among homeowners. More than 80% of them have locked in their mortgage at fixed rates. The erosion of affordability has happened as the average two-year fixed mortgage rate has jumped to 5.15%. Five-year fixed mortgages are marginally lower at an average of 5.08%, according to Moneyfacts data. Since the start of the mini-budget era lenders have been slashing rates on new fixed deals, a clear sign of changing market conditions.
“I had a really good rate, then all of a sudden it changed and I got caught out. A drop would help because I’ve just been made redundant, so that would help a wee bit. I don’t think it will ever go back to the way it was.”
The upcoming interest rate decision follows President Trump’s tariff policy announcement in the United States after the Monetary Policy Committee’s last meeting in March, further complicating the global economic landscape.
The upcoming interest rate decision follows President Trump’s tariff policy announcement in the United States after the Monetary Policy Committee’s last meeting in March, further complicating the global economic landscape.