BoE base rate reduction: Head of Mortgages reveals how it'll impact YOUR mortgage
In a significant move just announced, the Bank of England (BoE) has lowered the base rate to 5.00%, bringing welcome relief to mortgage holders and prospective homebuyers across the UK.
John Fraser-Tucker, Head of Mortgages at online mortgage adviser Mojo Mortgages, expressed his enthusiasm for the announcement: "After being held at 5.25% for the last seven base rate announcements, it's great news to see that it has finally lowered to 5.0%. This reduction may encourage those who are looking for a new mortgage in the near future."
John-Fraser Tucker, Head of Mortgages at online mortgage adviser Mojo Mortgages has also explained how the reduction is likely to impact mortgage borrowers.
Tracker mortgages
"If you have a tracker mortgage, the recent rate cut will immediately reduce your monthly payments. Our internal research shows that the average 2-year tracker mortgage rate has been 5.79% over the past month.
"With a 75% loan-to-value (LTV) ratio on a 25-year mortgage for an average-priced house valued at £265,600, your monthly payment would be £1,257. However, with the base rate now decreased by 5.00%, your new monthly mortgage payment would be £1,164 - a saving of £93."
Variable rate mortgages (standard variable rate and discount deals)
"If you have a variable-rate mortgage, your lender may lower their mortgage rates in response to the base rate reduction (if they haven't already in anticipation of the change). Since the recent stabilisation of the housing market following the General Election, many lenders, including HSBC, Barclays, and NatWest, have already begun to adjust their rates. This trend suggests that further reductions may be forthcoming, providing much-needed relief for borrowers.
Fixed-rate mortgages
"If you're nearing the end of your fixed-rate mortgage, today's base reduction is likely to benefit you, as it could result in cheaper fixed-rate deals becoming available.
"However, fixed mortgage rates aren't solely determined by the base rate. Over the past year, when the base rate remained at 5.25%, average rates for two-year fixed mortgages ranged from 4.9% to 6.5%. This difference could mean a monthly payment variation of £193 on a £200,000 mortgage.
"Consulting with a mortgage adviser can help you secure the most competitive rate tailored to your circumstances."
How fixed mortgage rates have fluctuated over the last year despite a steady base rate
After analysing their internal data, Mojo Mortgages has uncovered the average fixed mortgage rate for 2-year and 5-year fixed-rate mortgage deals for every month of the past year, despite the base rate remaining at 5.25% since August 2023.
The data is based on Mojo Mortgages' deals available from five of the biggest UK lenders: Santander, Nationwide, NatWest, Halifax, and HSBC.
|
Date |
Average rate - 2-year fix |
Average rate - 5-year fix |
|
31 July 2023 |
6.5% |
6.0% |
|
31 August 2023 |
6.3% |
5.7% |
|
30 September 2023 |
5.9% |
5.4% |
|
31 October 2023 |
5.7% |
5.3% |
|
30 November 2023 |
5.4% |
5.0% |
|
31 December 2023 |
5.3% |
4.9% |
|
31 January 2024 |
4.9% |
4.5% |
|
29 February 2024 |
5.0% |
4.6% |
|
31 March 2024 |
5.0% |
4.6% |
|
30 April 2024 |
5.2% |
4.7% |
|
31 May 2024 |
5.2% |
4.7% |
|
30 June 2024 |
5.2% |
4.7% |
Commenting on the above table, John Fraser-Tucker, Head of Mortgages at Mojo Mortgages said: "This data paints a fascinating picture of the mortgage market's volatility over the last year, despite the BoE's base rate remaining unchanged until today. The significant differences in rates highlight the importance of timing and thorough research when securing a mortgage."
All of your Bank of England base rate questions answered
To help readers, Mojo Mortgages have also created a brand-new How the Bank of England base rate impacts your mortgage guide which answers the most common base rate questions regarding mortgages. This includes:
- How does the base rate work?
- Why is the base rate so high?
- How does the Bank of England base rate impact my mortgage rate?
- What are swap rates?
- How have inflation and base rate changes impacted the average mortgage rate since 2021?
- Should I wait until the base rate falls to remortgage?
Looking to remortgage? Speak to a mortgage broker today
As the UK housing market responds to today's pivotal change, homeowners and potential buyers are encouraged to explore their options. Consulting with a mortgage broker can provide invaluable insights and help secure the best rates available.
At Mojo Mortgages, we offer access to over 70 lenders, including high-street banks, building societies, and specialist mortgage providers. However, what truly sets us apart is our unparalleled data-driven approach. At Mojo Mortgages, we have data on every corner of the mortgage market - from search comparisons and submissions to mortgage insurance and conveyancing. This wealth of information empowers us to offer mortgage borrowers efficient and hyper-personalised mortgage solutions.
With Mojo Mortgages, you're not just getting a mortgage - you're getting a data-powered advantage in one of life's biggest financial decisions.
