Boon for homebuyers as Bank of England interest rate freeze ‘good time' for mortgage ‘budgeting’

Boon for homebuyers as Bank of England interest rate freeze ‘good time' for mortgage ‘budgeting’

British public react to interest rates kept at 5.25 per cent

Patrick O'Donnell

By Patrick O'Donnell

Published: 07/02/2024

- 14:20

The Bank of England has held interest rates at the same level for months with analysts pricing in mortgage rate reductions later in the year

House hunters are being told to “start budgeting” for a mortgage following last week’s Bank of England announcement.

The central bank confirmed the base rate would remain at 5.25 per cent for now as the Bank attempts to bring inflation down to its desired two per cent target.

Since August 2023, the financial institution has chosen not to raise interest rates following a series of significant hikes.

This has led to homeowners being saddled with soaring mortgage repayments in the past year but an expert has suggested “the worst of bad news is over now”.

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Bank of England and person holding house keys

The Bank of England's decision over interest rates will impact mortgages


Michael Dinich, personal finance expert at Wealth of Geeks, said: “Even the more pessimistic house hunters have reason to cautiously welcome the Bank’s rate freeze.

“At the very minimum, borrowing is unlikely to become more expensive in the near future than it has been over the past two gruelling years. At best, we might finally hear some good news and get lower mortgage rates overall as early as May.

“This means house hunters can start budgeting based on today’s rates, as the worst of the latest wave of bad news is over now. Now is a good time to start planning and be prepared to possibly implement between now and this summer.”

Despite “budgeting” for mortgages likely becoming easier in the neat future, homebuyers are being urged to check other factors in the property market.

Experts at Wealth of Geeks noted that house prices have fallen by 2.1 per cent year-on-year, based on figures from the Office for National Statistics (ONS).

Prior to the Bank signalling cuts later in the year, house prices were expected to continue to drop throughout 2024.

However, experts from Wealth of Geeks warned that with mortgage rates set to fall and the cost of living easing, house prices could begin to go up again.

Mr Dinich added: “Ultimately, if you have your finances sorted and you find the right house for you, now might be a good time for you to act.

Mortgage holders look at tablet and statementsHouseholds have been forced to deal with rising mortgage repayments and being priced out the housing market GETTY

“Bear in mind that banks have just started offering more competitive fixed-rate mortgage products, which might not actually be ideal if the base rate is going to fall to levels that make variable-rate mortgages cheaper. It may be wiser not to dive head-first into fixed-rate borrowing right now.”

According to Moneyfactscompare, the average two-year fixed residential mortgage rate today is 5.57 per cent as of today. This is down from an average rate of 5.58 per cent on the previous working day.

Furthermore, the average five-year fixed residential mortgage rate today is 5.22 per cent which is the same from yesterday.

Currently, the average two-year and five-year buy-to-let residential mortgage rates remain unchanged at 5.48 per cent and 5.48 per cent, respectively.

Today’s average two-year tracker rate is 6.15 per cent which is also unchanged from the previous working day.

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