While the government is currently celebrating the decrease in the inflation rate, it’s essential to note that reductions in the base rate remain unlikely. In fact, the conclusion of rate hikes might still be on the horizon.
Yesterday, the Conservative party raised a toast to Rishi Sunak, who fulfilled his promise to halve the inflation rate ahead of schedule. UK inflation dropped to 4.6% in October, a significant decrease from September’s 6.7% and a noteworthy retreat from the October 2022 peak of 11.1%. However, the Bank of England’s inflation target of 2% remains a distant speck, visible only through squinted eyes(1).
With the approaching winter and the expected surge in energy bills, the inflation rate may hover around 4.6% for some time, making it unlikely that the BOE will further lower the base rate anytime soon.
The pressing question for mortgage holders facing higher-than-anticipated fixed rates remains: What’s the game plan?
The positive news is that recent inflation data, coupled with the BOE’s decision to halt consecutive rate hikes at 14, has prompted a drop in fixed-rate mortgages. Leading players like Halifax and HSBC are offering 2-year fixed rates below 5%, with five-year rates approaching 4.5% and potentially dropping further. Despite not feeling like it, these developments are a significant silver lining for those opting for fixed rates now(2).
The window of opportunity is open and should remain so after yesterday’s positive inflation news. However, for those hesitating on their remortgage, caution is crucial, given the ever-present possibility of further rate increases. This apparent opening may not linger indefinitely; the window, as unpredictable as ever, could swiftly shut once again.
In the recent MPC meeting, three members voted for rate hikes(3). In the event of economic negativity in the coming months, rates might rise again, especially with the unmet inflation target still outstanding. Bank of England Governor Andrew Bailey recently confirmed this uncertainty, stating, ‘It is too soon to say that rate rises have ended (4).
So, what’s the remedy for UK mortgagors grappling with the ongoing cost of living crisis?
Enter your mortgage advisor – this is their moment to prove their weight in gold.
A good advisor is there to provide reassurance to borrowers patiently anticipating low rates that may not materialise, fostering confidence in their remortgage decisions.
If you’re currently hesitating on your remortgage, our advisors are prepared to steer you through a variety of potential options, ranging from specialist solutions to interest-only and longer-term deals.
A proactive homeowner could secure a deal now as attractive as anything on the horizon in 2024. Navigating these economic waters wisely involves letting your mortgage advisor be a compass steering you toward financial stability.
If you want talk through your options in an initial, free consultation, ring us now: 01489 346624.
Financial info: Your home may be at risk if you do not keep up repayments. Think carefully about securing debt against your home. When consolidating existing borrowing, be aware that extending the term could increase the amount repaid.