Commenting on the MPC’s decision not to change the Bank Rate from 5.25%, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said:
“It came as no surprise that the MPC held the Bank Rate at 5.25% for another month. However, the markets remain confident that the Bank Rate will drop during this year, which has seen mortgage borrowers already benefiting from falling rates, as lenders reflect expected future rates.
“This is good news for those on fixed-rate mortgages that were agreed before the Bank Rate started to increase in December 2021 – which is almost half (around 45%¹) of today’s fixed rate mortgages. Borrowers on these deals should still prepare for a significant increase in their mortgage payments, but it won’t be as big a shock as it would have been if their deal ended last year.
“For example, re-mortgaging a £130,000 mortgage on an average 2 year fixed rate in August 2023 would have cost £874 in monthly repayments, the same re-mortgage today would be around £80 a month cheaper, at a monthly payment of £794².
“It is a similar picture in the savings market, where the highest rates were seen towards the end of 2023. However, there’s still a wide choice of accounts with attractive rates available today, and shopping around can make a sizeable, financial difference, particularly for those who are holding a large amount of savings in their current account.”
¹ Fixed rate mortgage deals agreed before December 2021 yet to renew December 2023 Financial stability report
² Calculations based on average 2 year fixed rates at a range of LTVs in August 2023 and December 2023 based on Bank of England data.