How The Bank Of England's Base Rate Cut Impacts UK Mortgage Rates

How The Bank Of England's Base Rate Cut Impacts UK Mortgage Rates

The recent Bank of England base rate cut from 5% to 4.75% aimed to make borrowing easier, but UK mortgage holders are seeing a surprising effect: rates are climbing, not dropping. Major banks, including HSBC, Barclays, and Nationwide, are raising mortgage rates despite the base rate cut. Here’s why mortgage costs are rising—and what it means for UK borrowers.

Why Are Mortgage Rates Rising?

Big Lenders Break Tradition:
With a lower base rate, borrowers typically expect mortgage rates to drop. Yet several major UK lenders have recently increased their rates. HSBC raised mortgage rates twice within two weeks, and Santander followed suit with hikes up to 0.31% for both new and existing customers. For UK borrowers, this means higher costs, despite the base rate cut. So, what’s driving lenders to act this way?

Economic Pressures Holding Up Rates:
Behind the lender rate hikes are two main factors: market conditions and inflationary pressures. High demand and limited product availability are causing lenders to raise rates. Over 200 mortgage options were pulled from the market since July 2023, making it harder for borrowers to secure deals.

Then there’s inflation. Although the base rate dropped, inflation remains high, affecting lenders' strategies. With rising energy prices and service costs, inflationary risks continue to push lenders toward a cautious approach, as highlighted by Catherine Mann, a key Bank of England policymaker.

What Can Borrowers Do Now?

Secure Mortgage Deals Quickly:
With lenders rapidly raising rates, locking in a mortgage deal sooner rather than later could help UK borrowers avoid higher costs. Acting swiftly to secure a fixed rate may shield you from further increases and help you find the most affordable solution for your financial situation.

Seek Expert Advice From Mortgage One
In this challenging mortgage environment, consulting a mortgage broker offers valuable insight. Mortgage One can help you understand your options, compare rates, and choose a deal that aligns with your financial goals. By working with experienced brokers, you’ll have a clear understanding of how rate changes impact affordability.

Conclusion

The recent base rate cut from the Bank of England didn’t bring the expected relief to mortgage rates; instead, lenders are raising costs due to market conditions and inflationary concerns. Staying informed and working with a trusted mortgage broker like Mortgage One can help you make wise choices in today’s complex market. Whether you’re remortgaging or purchasing a home, Mortgage One is here to guide you in securing the best mortgage rates and managing payments effectively.