The next Bank of England Monetary Committee meeting is on the 7th November. In September, the Bank decided to maintain the rate at 5.00%.

The rate of inflation fell to 1.7% earlier this month fueling speculation that the Bank could reduce interest rates further by the end of the year by up to 0.5%.

However, there are some that still feel the Bank should be cautious. For example, BNP Paribas argues that the fall in headline inflation has come mainly from “quick wins” related to global factors, including easing energy prices and the normalisation of supply chains, while services inflation remains sticky.

The French bank told clients in a note: “The larger-than-expected fall in UK inflation in September – to below 2% – increases the likelihood of a 0.25% rate cut from the Bank of England in November, in line with our base case.”

It will be interesting to see what the Bank of England decides to do between now and the end of the year. Either way, this appears to be a far more positive position compared to this time last year.

Mortgage Rates

It’s been a strange month for mortgage fixed rates after a few months of successive reductions.

At the beginning of the month, Santander released its ‘lowest rate yet’ which made good reading for borrowers.

However, within a matter of days, there were reports that lender rate cuts had come to an abrupt halt. The underlying reasons for this was stated to be economic uncertainty and rising oil prices.

A few days later, many lenders had increased their rates. This included Natwest who increased their rates by up to 0.3%.

However, jump forward a week or so and the same lender reduced their rates by up to 0.41%.

While all of this was happening, the Financial Conduct Authority (FCA) had reportedly released data that the popularity of tracker mortgages had increased by 67% over the past 3 years. This is quite Interesting, given that you would have thought that borrowers would have opted for stability during this time.

Our Thoughts

It will be interesting to see what happens on the back of the Autumn Budget and the next Bank of England Committee meeting as this could have an impact on both confidence and interest rates.

In terms of mortgage fixed rates, the good news is that in spite of the ups and downs this month, the average rate still starts with a 4 (rather than a 6 which was the case during the peak).

If you are looking to borrow, the important thing is to cut through the noise, find out the facts and see how it affects you individually so that you can plan accordingly.

In terms of tracker rates, this data isn’t a huge surprise to us. With fixed rates spiking, some people preferred the flexibility that trackers provide. The plan for these people was to wait until rates reduced and then switch.

The problems with this strategy are variable such as –

1. When will rates fall? 
2. What does the rate need to fall to?
3. What premium will you pay in the meantime?
4. What happens if rates go up?

Although it may seem like a good idea, you would need to consider the answers to these questions very carefully. You need to be prepared for, and able to cope with, the potential risks involved with this approach.