The Bank of England decided to hold the base rate at 3.75% at the latest Monetary Policy Committee meeting.
This decision was widely anticipated as the Bank continues to balance inflationary pressures against concerns around economic growth and wider global uncertainty.
While inflation remains above the Bank’s long-term 2% target, there have been encouraging signs over recent weeks that inflationary pressures may be easing.
Recent figures showed that UK inflation fell more sharply than expected in April, which has strengthened speculation that further rate cuts could still happen later this year.
Mortgage Rates
Mortgage rates have continued to edge downwards over the last month, although the pace of reductions has varied across the market.
A number of major lenders including Barclays, HSBC, TSB, Halifax and Santander have all reduced rates across parts of their mortgage ranges over recent weeks.
Moneyfacts also reported that average mortgage rates have continued to creep downwards, although uncertainty remains around how quickly rates could reduce further.
At one stage earlier in the month, some commentators suggested that rate reductions had begun to stall as markets adjusted to ongoing economic uncertainty.
However, lenders have since continued repricing products in both directions depending on funding costs and market expectations.
Encouragingly for borrowers, competition between lenders remains strong.
Rates start from around just under 4.5% in certain areas of the market, particularly for borrowers with larger deposits or equity levels.
Although not everybody will qualify for the lowest headline rates, overall pricing remains noticeably lower than it was just over a month ago.
Our Thoughts
It’s encouraging to see mortgage rates continuing to trend gradually downwards despite ongoing uncertainty surrounding inflation, the wider economy and world events.
At the moment, it feels like lenders are trying to balance potential optimism around future rates with caution around inflation and global events.
As a result, rates may continue to fluctuate over the coming months rather than moving in one clear direction.
For borrowers approaching the end of a fixed rate, this reinforces the importance of planning ahead.
Where possible, securing a product early while retaining the flexibility to switch if rates improve further could still be a sensible strategy.
Ultimately, while rates remain significantly higher than the ultra-low levels seen a few years ago, the market currently feels more stable and competitive than it did during the volatility experienced through 2022 and 2023.
