Firstly, it’s worth pointing out that at the time of writing, the Bank of England has cut the base rate of interest from 5 per cent to 4.75 per cent – its lowest level since 2022. As you might expect, this decision is hugely welcomed by our team of Berkshire mortgage brokers.
What this means for those on tracker mortgages is that their monthly repayments have just shrunk, which is great news. However, falling inflation, which will have prompted the base rate cut, was happening anyway and falls outside of the recent budget’s influence.
What we’re looking at here is the impact the Chancellor of the Exchequer’s recent budget is likely to have on mortgages going forwards.
As a Maidenhead mortgage broker that has witnessed many budgets over the years, here is our view.
On the up?
Now, the base rate may have just fallen, however we predict that mortgage rates are going to rise in the short-term. Why? Because the level of borrowing within this year’s budget is high – very high.
When you consider the widely-debated £22bn black hole and the £40bn of tax rises needed to help fill it, it’s no wonder that borrowing costs have jumped. And, when this happens, mortgage rates tend to follow.
Swap rates are also on the up, and given how they play a pivotal role in determining the cost of fixed rate mortgages, it’s widely expected that rates are likely to continue increasing well into 2025.
Similarly, the Office for Budget Responsibility has predicted that Reeves’ measures are likely to send inflation back up, the result of which will also have a knock-on effect with mortgage rates.
We’ve already seen a number of lenders on our panel increase their fixed rate mortgages – albeit marginally. However, we expect this to continue over coming weeks as the budget aftershocks continue to play out.
Take action now
If you’re thinking of moving and need a mortgage any time soon, then our advice is simple. Begin the mortgage application processimmediately.
The reason behind this is that any mortgage offer granted today will typically last for six months. So, if you get a fixed rate mortgage offer at, say, 4 per cent today, but the repercussions of the budget do send rates spiralling upwards to a theoretical 5 per cent by the time you need a mortgage six months from now, then the 4 per cent offer will still stand. Of course, the six-month window is inclusive of the application processing time, so it’s safer to view it as a five-and-a-half-month window, just to be on the safe side.
Conversely, if they fall – and we’re not convinced that they will – you can simply reapply for the preferential rate of the day. Taking steps to apply for a mortgage today, even if you don’t need a mortgage today, is taking sensible financial measures to protect yourself.
The good news is that house prices are at an all-time high, according to an article in The Guardian. Not only that, but property transactions are up, too. So, the property market is heading in the right direction overall. However, mortgage rates are very important when it comes to homeowners establishing their monthly outgoings, so it’s these that will be watched with interest over the coming weeks.
If you think you might be moving in the future – and certainly within the next six months – then call our team of mortgage brokers in Maidenhead, all of whom have access to the best UK mortgage deals currently on the market.
Don’t be deflated by the budget. Find out how you can make it work for you and your mortgage by contacting our Maidenhead mortgage brokerage on 01628 560820 or by emailing enquiries@altonmortgages.co.uk.