With the Bank of England cutting their base rate last week bringing it below 5% for the first time since June 2023, I have had several clients asking me “will this affect the mortgage rate we can get when we remortgage?”
Well, the simple and straightforward answer is “Yes, as long as you are remortgaging onto a lenders Standard Variable Rate or a Tracker rate product”
However, if you are hoping that Fixed rates will also decrease, then I am afraid you may possibly be disappointed. Banks and Building Societies set their Fixed rates around what are known as swap rates. To explain briefly, a swap rate is a rate based on what markets think interest rates will do in the future. If the swap rates rise, then lenders will look to increase their rates to ensure they don’t lose out. Conversely, if swap rates come down then mortgage rates are also likely to come down.
Of course, the Bank of England base rate will have an effect on swap rates as an increase or decrease can signal a deeper seated set of economic measures that are about to be played out, but the change in fixed mortgage rates will rarely be immediate following any such change, the lenders will all wait to see what the money market reaction is going to be first.
I hope that this brief summary will help your understanding of how mortgage rates are set.
If you'd like to get in touch to discuss your circumstances visit www.abode-mortgages.co.uk or call 01206 252025 for a FREE initial consultation.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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