While the Bank of England has opted not to cut interest rates today, home buyers could see some small mortgage rate cuts in the coming weeks.
That’s according to Rightmove’s mortgage expert, Matt Smith.
Two more rate cuts are expected by the end of the year, and Smith says lenders could make similar moves sooner.
“Lenders have a bit of room to reduce rates further even with a hold in the Bank Rate today so home-movers can still be hopeful of some small mortgage rate cuts over the next couple of weeks,” he says.
Money blog regular and director at L&C Mortgages David Hollingworth says borrowers will be disappointed by today’s decision, but mortgage rates “seem to have found a level for now”.
“With a degree of uncertainty never far away it looks like borrowers will continue to pick up a deal and hope that they may be able to improve on it at a later date,” he adds.
Rachel Springall, finance expert at Moneyfacts, offers the Money blog a different perspective, pointing out that lenders don’t just follow the path of the base rate when tweaking mortgage rates.
“Those weighing up future rate expectations traditionally follow the swap rate market, and as it stands swaps are hovering between their 30-day highs and 30-day lows,” she says.
“While this week has a bit subdued for mortgage activity, we have seen a handful of lenders cut rates rather than hike them. Hopefully, this sentiment will continue over the coming weeks.”
What does this mean for fixed rates?
Lenders tend to price in any base rate changes when setting the fixed rate deals, so changes could be made on expectations that more cuts are in the pipeline.
There will also be a lot of borrowers coming towards the end of their current fixed deal, which might be lower or higher than the rates being offered now.
Those who fixed in the aftermath of the mini budget might see an improvement in the deals, while those who bagged an ultra-low deal in 2020 could see their monthly payments jump significantly.
What about tracker and variable rates?
When the base rate changes, these are some of the first mortgage deals to feel the impact.
Not all deals guarantee to mirror base rate movement and lenders can adjust standard variable rates as they like.
However, a hold in base rate is likely to mean they will have longer to wait before they see any payment reductions.
