The Bank of England has maintained the benchmark interest rate at 5 percent. This decision follows a modest decrease of 0.25 percent at the prior meeting in August, fuelling anticipation among some that the Monetary Policy Committee (MPC) might enact another cut. However, with an 8 to 1 vote, the committee opted to keep the rate steady, with only one member advocating for a decrease to 4.75 percent.
Persistent inflation levels exceeding the 2 percent goal, coupled with projections of a slight rise in the coming months, prompted a conservative stance from the Bank, despite market speculations of at least one more rate cut by year’s end, potentially in November.
A future reduction in the rate would enhance affordability for borrowers, alleviating financial burdens for households and thereby supporting broader economic growth. This becomes even more crucial if upcoming fiscal policies tighten, accentuating the need for stimulated activity within the real estate sector.
Nonetheless, despite the Bank of England’s decision to hold off on rate changes this session, some mortgage providers are independently lowering their rates in a bid to attract customers. Amid competitive pressures, Santander recently unveiled a two-year fixed mortgage below 4 percent*, reflecting the lowest two-year swap rates observed in the past two years. Additionally, numerous lenders are offering five-year fixed rates below 4 percent, providing longer-term payment stability.
While the era of minimal mortgage rates has passed, the current reductions offer some relief to borrowers who have faced increasing costs. Ongoing competition among financial institutions is expected to drive further moderate declines in mortgage rates as they compete for market share.
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*Subject to meeting the lenders terms and conditions