07 Aug First Bank of England Base Rate reduction in 4 years and what it means for your mortgage borrowing
For the first time in four years, the Bank of England (BoE) has reduced the Base Rate to 5%, a 0.25% decrease from the previous 5.25%. This marks a significant shift as rates had been held steady since August 2023 after 14 consecutive increases. The BoE’s decision reflects the successful stabilisation of inflation at the government’s target of 2%, down from over 10% in early 2023.
If you’re looking for a property to buy in Colnbrook, Slough, and the surrounding area, make sure you give the leading estate and lettings agents in Colnbrook a call on 01753 683000 or email us and we’ll help you find your next place to call home.
If you’re considering buying your next home in Colnbrook, understanding mortgage rates is crucial to understanding your affordability. The recent decision by the BoE to cut the Base Rate for the first time in four years can have a notable impact on your mortgage borrowing. Staying informed about rate changes is essential to making the best financial decisions for your future when buying, selling or re-mortgaging property in Colnbrook.
Understanding the decision
The BoE’s rate hikes over the last few years were aimed at controlling high inflation. With inflation now under control, the BoE has decided to ease financial pressure on businesses and households by lowering the Base Rate, indicating that their strategies to manage inflation are effective.
Impact on mortgage rates
Earlier in the year, an unexpected rise in inflation pushed mortgage rates higher. However, recent positive inflation reports have led to stabilised and even declining mortgage rates. Competition among lenders has intensified, resulting in noticeable rate drops, including the reintroduction of sub-4% mortgage rates for those with substantial deposits. Currently, the average 5-year fixed mortgage rate is down to 4.87%, and the average 2-year fixed rate has dropped to 5.25%. This is good news for those looking to secure affordable homes in Colnbrook.
What this means for your current mortgage
For those on fixed-rate mortgages, monthly payments will remain unchanged until the end of the term. However, if you have a tracker or variable-rate mortgage, the Base Rate reduction should now lower your monthly payments. If you’re considering moving home in Colnbrook, using a mortgage calculator can help you determine your borrowing capacity. Additionally, applying for a Mortgage in Principle can provide a more personalised estimate.
Affordability considerations
Lenders use ‘stress test’ calculations to ensure borrowers can afford their mortgages even if repayments increase significantly. These calculations are linked to Standard Variable Rates (SVRs), which might start to reduce following the Base Rate cut, potentially improving affordability for borrowers. Ensure to keep on top of what you can borrow when looking for a new home as this will help you to set your budget or what your maximum offer would be on your next home.
The Mortgage Charter
If you are currently worried about your mortgage, there is help available for you. Introduced in July 2023 by the UK Government, the Mortgage Charter aims to assist borrowers struggling with payments or those nearing the end of their fixed-rate terms. It encourages lenders to offer flexible options, such as locking in new deals up to six months before the current rate ends. Re-mortgaging with another lender remains an option, though it involves a lengthier process, including income checks and home valuations. If you feel this may be something that could help you, visit the gov.uk website here or speak to your current lender if you are worried about your mortgage repayments.
Future Interest Rate trends
The BoE’s Monetary Policy Committee meets every six weeks to review and adjust interest rates. While a continued downward trend in rates is expected, it is unlikely that rates will return to the historic lows seen in 2021. Market forecasts suggest another potential 0.25% cut by the end of this year, but this will depend on the broader economic environment. We will continue to monitor this and bring you news on any changes affecting the property market in Colnbrook, Slough and surrounding areas.
The recent Base Rate cut by the Bank of England marks a positive step for borrowers, indicating a stabilisation in the financial landscape, something we are very excited about for our clients. For Colnbrook residents old and new, this could mean more favourable mortgage rates and improved affordability in the near future.
If you’re thinking of selling your home and upsizing in Colnbrook and would like a free Valuation of your property, contact us today. Our team is ready to assist you with a professional assessment to ensure you get the best value for your property.
Contact Us
If you would like to speak to someone about your property, or if you are considering buying a property, for yourself or to let or you’re in need of finding rental property, we are the leading independent estate agents in Colnbrook. So, contact us on 01753 683000 or email us. You can also follow us on Facebook, LinkedIn and Instagram.