We thought we’d let the dust settle a little before giving our thoughts on the latest Bank of England decision on interest rates. Not, of course, because we were shocked that the perennial campaign of increasing the rate has finally come to an end. Rather, to see what the market sentiment was to the decision a few days down the line.
Up until more or less the last minute, everyone who’s anyone thought we were in for another 0.25% rise. But then the inflation figures came out and talk began to emerge that, given inflation had fallen by more than expected, perhaps that was the excuse the bank needed to pause. And so, it came to pass.
Perhaps unsurprisingly, the reaction has been positive, at least in the world of mortgages. Swap rates, those rates that are pretty important when it comes to mortgage pricing, have fallen and now (at least at the time of writing) 5-year Swaps are 4.3%. Given that just a month ago they were north of 5%, this is significant.
And lenders are reacting. Well, to be fair, they had been reacting before the announcement. All we are seeing at the moment is rate cuts, and that’s worthy of a mild celebration. Of course, as we have said more times than a little, there is a lot more that goes into picking the right mortgage than just the rate, but it would be disingenuous to say that it isn’t better arranging a new mortgage against a backdrop of falling rates.
As to where we go from here, it remains difficult to predict. But we’re going to stick our proverbial heads above the parapet and say that rate rises are done. All the talk suggests inflation will continue to fall back quickly from here and that has been such a big driver for the continual programme of rate rises to this point.
What we do think though is that interest rates will stay higher, for longer, before they too start to fall back. Therefore, there remains a good argument for thinking about a short-term deal if you are due for a new mortgage soon, in the hope that in a few years’ time rates will be lower than they are now. However, again, to be unequivocally clear, this is generic advice. And that will never do.
All this means (as it always does) that keeping in touch with your mortgage adviser has never been more important. Get advice, no matter what you do. Of course, if that’s with us, so much the better.