Last week, the Bank of England announced that the base rate would hold after the Monetary Policy Committee voted to maintain it at 0.75%. So, what does this mean for those already with and those who want to secure a new mortgage?
Before the announcement, there was much speculation that the base rate would receive another cut after some pessimism surrounding the effects of political upheaval and Brexit uncertainty; but the decision to hold the base rate indicates that there is confidence in the UK’s economy.
Paresh Raja, CEO at Market Financial Solutions, said: “The Bank of England treads carefully when deciding on the interest rate, so the fact they’ve decided to leave it at 0.75 percent is an important decision.
“Investor confidence is returning, and we are likely to see the markets post a modest performance in the aftermath of this announcement.”
Mortgage rates remain competitive
Had the base rate been reduced, it may have intensified competition between mortgage lenders even further. However, the low-interest climate means the great deals available to borrowers are unlikely to disappear anytime soon.
There is a possibility that the Bank of England could consider increasing the base rate over the coming months, depending on how Brexit plays out. Therefore, borrowers looking to purchase or remortgage might consider securing a low deal sooner rather than later.
However, they are advised not to panic about a sharp increase in rates anytime soon, with the economic growth forecast for the first quarter of 2020 at a modest 0.2% and the entire year projected at just 0.75%.
Daniel Hegarty, CEO of Habito, said: “We hope today’s ‘keep calm and carry on’ approach to hold interest rates will complement the bounce seen in consumer confidence following the election, and get the UK moving in 2020.”
Mortgage approvals show confident market
Over the past few months, competition between lenders has seen more products than ever available to both the mainstream residential and buy-to-let mortgage markets. Rates are historically low for many borrowers, who are being urged to take advantage of this wherever possible.
The latest data released for 2019 showed that residential mortgage approvals had seen a significant upturn compared to 2018, with the highest number of mortgages approved in the past four years. The value of the mortgage market has also been on the rise, and the sector is seeing a revival in confidence since the December general election.