Our inaugural blog see’s us address what is going on in mortgage market in mid 2024 and what to expect in the coming months. Unless you have been living under a rock for the last couple of years you’ll know that mortgage rates have gone from all time lows to 16 year highs. These higher rates coupled with inflation (that up until recently has been out of control) and increased fuel costs (caused in large by a conflict 2,000 miles away) have had many households wondering what the future holds for them and when will the light at the end of the tunnel get nearer.
Well, that light appears to be tip toeing closer. Although far from guaranteed, many feel tomorrow (1st August 2024) will see the first Bank of England Base rate cut since March 2020. The rate currently sits at 5.25%, a drop to 5% is being mooted, however, “service inflation” (currently 5.7%) is believed to be the stumbling block for those sitting on the fence within the “monetary policy committee”.
We have to consider what a Base rate drop would mean to us, the general public. We already have mortgage rates considerably lower than the base rate (we’ll come back to why that is shortly), so, what not so obvious benefit will help us? Confidence… the market has been very volatile for a considerable time which has ripples felt in many other areas, none more so than house prices and house sales. We’ve been hearing from agents that the market has been stagnant for large periods of this year and last with the odd “false dawn” thrown in sporadically. A base rate drop could be the shot in the arm the housing market is craving. We know when the housing market is thriving the overall economy benefits
So, how is it that Banks and Building Societies can offer mortgage rates at a lower rate than what they can borrow money from the Bank of England? It’s a very obvious question that I’m sure some have been wondering. Well, lenders don’t tend to borrow all too much from the Bank of England when the rate on offer is high. There is another route that gets far less media coverage and that’s borrowing money from other lenders this is where “Swap rates” come in to play. Recently these rates have been reducing and that is reflected in the mortgage rates being offered to the consumer, you. It’s likely that a base rate cut will see the Swap rates come down a little further which the nation’s borrowers are crying out for, savers on the other hand stand on the other side of the platform.
What if I’ve got a mortgage rate coming up for renewal this year or early next? My advice to you is to do something as soon as you have 6 months left on your current deal to benefit from the old adage, “best of both worlds” and here’s why. When you get a new mortgage offer lined up more often than not that deal will have a 6 month window in which you can use it. Let’s say for example that deal is 5%, if rates improve between now and the end of your current deal your broker will be able to change that product with the lender or if something better is available with a new lender, then that can also be considered (at Venture we would not charge you to change the deal, it’s all a part of the service).
But let’s play devils advocate for a moment and say that (although unlikely) rates were to increase in the next 6 months, above the 5% you have been offered….. well you have secured the 5% and that’s not going to be taken away from you, Voila! Best of both worlds.
Should you have any questions about your mortgage feel free to reach out, we’re always very happy to have a free initial chat over the phone, in person or online, whatever works for you.
