The Bank of England has voted to cut interest rates by 25 basis points to 5 per cent. The timing of the reduction came as a bit of a surprise, given that the Bank also warned in the minutes of its meeting that it expects inflation to rise to 2.75 per cent in the second half of the year. News that the US Federal Reserve decided to hold its interest rates on Wednesday while signalling that it will cut rates in September if inflation looks set to ease, seemed to point to the Bank of England adopting a similar approach.
But with the Monetary Policy Committee voting by five members to four to reduce rates in August, with four members voting to hold rates at 5.25 per cent, the vote was carried. This news will be welcomed by borrowers who have had a challenging time in recent months, particularly with affordability, which makes it harder to commit to a property purchase. Now that the Bank has signaled that rates have peaked and are on their way down, borrowers can plan ahead with more confidence.
Swap rates, which underpin the pricing of fixed-rate mortgages, have been remarkably volatile this year but have been declining in recent weeks, which has led lenders to reprice their mortgages lower. Halifax, NatWest and Santander have all reduced their mortgage rates, while Nationwide is now offering a five-year fix at 3.99 per cent for new purchases. There are hopes that other lenders will follow suit and more mortgages will be available starting with a ‘3’, which would be regarded as much more palatable by borrowers.
SONIA swaps
30 Jul 2024 28 Jun 2024 31 Jul 2023 1 Year 4.668% 4.829% 5.678% 2 Year 4.255% 4.465% 5.493% 3 Year 4.019% 4.218% 5.194% 5 Year 3.778% 3.938% 4.738% 7 Year 3.694% 3.830% 4.434% 10 Year 3.709% 3.822% 4.202% 15 Year 3.807% 3.892% 4.059% 30 Year 3.827% 3.880% 3.824%
As of 31 July
Source: Chatham Financial
With the Labour Government promising an ambitious house-building programme and reviewing the planning system, this could boost the housing market and provide more opportunities for buyers. The latest Nationwide house price survey shows that the market is proving to be remarkably resilient with UK house prices growing at the fastest rate in 18 months, up from 1.5 per cent in June to 2.1 per cent in July. Rather than the snap general election and its outcome putting off buyers and sellers, people who may have been sitting on their hands for a while as they wait to see what happens with interest rates are getting on with their moves. This rate reduction should further boost the market and could mean a busier autumn, particularly if the Bank of England reduces rates again.
Best buy home mover rates (60% loan-to-value)
Rate Type
4.28% two-year fix
4.21% three-year fix
3.99% five-year fix
Source: Moneyfacts
If you are planning on buying or remortgaging this year, AWS Private Finance can help. We are a whole-of-market broker who will look for the best mortgage for your circumstances, comparing all the products on the market. Products can usually be reserved up to six months before you need them, giving you peace of mind in case rates edge up further. Please get in touch for more information.
