Will The Base Rate Increase Again This Week?
The Bank of England’s Monetary Policy Committee (MPC) is set to discuss the base rate again on February 2nd and experts predict an increase of between 0.25 and 0.5 percentage points. Although this could mark the 10th increase to the base rate in just over a year, many lenders are not expected to follow suit with their mortgage interest rates.
Mortgage approvals are currently at their lowest since 2009, and lenders are trying to remain competitive in the market. This means that many lenders have already increased their mortgage rates through the year and are now bringing them back down in a bid to stay ahead. Despite the looming base rate increase, lenders still have room to reduce their rates further.
So, what exactly does this mean for homeowners?
Firstly, it is important to understand the concept of base rate. The Bank of England sets a base rate, also referred to as the Bank Rate, which is used by banks and other lenders to set their own rates. In this case, the Bank of England’s current base rate is 3.5%. This means that lenders will use this as the benchmark to set their own rates, taking into consideration their own costs, customer base and risk profile.
When the base rate increases, lenders can decide whether to pass on the increase to their customers. This means that mortgage rates can increase, resulting in higher monthly payments for homeowners. The good news is that in this case, lenders are not expected to increase their rates, despite a potential base rate increase.
It is also important to note that lenders can reduce their rates even if the base rate increases, so homeowners could benefit from reduced rates. This is because lenders have already increased their rates significantly throughout the year and have room to reduce them further. This could be beneficial for homeowners, as it could mean lower monthly payments and more savings in the long run.
However, it is important to be aware that lenders can also decide to keep their rates the same, or even increase them, regardless of the base rate increase. Therefore, it is important for homeowners to shop around to ensure they are getting the best deal.
Whilst it is difficult to predict what will happen in the future, it is important to be aware of the current situation and be prepared for potential changes. By understanding the concept of base rate and how lenders can use it to set their own rates, homeowners can be prepared for any potential changes and make sure they are getting the best possible terms on their mortgage.