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Borrowers Need Not Wait for the MPC to Cut Rates to Find Attractive Lender Deals

Borrowers Need Not Wait for the MPC to Cut Rates to Find Attractive Lender Deals

Next week is the June meeting of the Bank of England’s Monetary Policy Committee (MPC). It will be held a day after the data on the current state of inflation is shared. Last month inflation reached closer to the target rate of 2.0%, falling from 3.2% to 2.3%. However, as close it fell to target it was short of the forecast for 2.1%. Depending on the inflation report released on 19 June, the MPC will vote to either keep the current standard base rate steady or offer an earlier than expected surprise cut.

The decision of the MPC on 20 June will be considered by lenders as they set the rates for mortgages and remortgages. 

In the last four months rates have slowly risen as each month distanced from when a cut to the base rate was hoped to occur in spring. In the early part of the year, lenders were so optimistic and sought to be the one to grab the attention of a borrower that they lowered rates to below the base rate. From that point as optimism diluted for an early cut the rates have risen upward.

The Bank’s rate is at a 16 year high of 5.25% and if voted in June to hold steady will remain so until the next opportunity, which is the MPC meeting scheduled for August. There is not a MPC meeting set for July.

According to Moneyfacts, in May the average mortgage rates on two- and five-year fixed rate offers increased by 0.02%. The length of time a deal is available on the market dropped to only 15 days, which is down from 28 days of last month. Lender offers vary, but there are great deals to be found.

There are still some lenders holding out from erasing the declines offered in the first part of the year, leaving attractive deals available to home buyers and for homeowners seeking remortgages.

The average two-year fixed rate mortgage, according to Moneyfacts, was this week at 5.97%. The five-year fixed rate mortgage average was 5.53%. Despite being higher than the averages of weeks ago, they are still lower than those on the lending market this time last year.

Borrowers are encouraged to shop for the deal best suited for their needs. Brokers work with many lenders at a time for the benefit of the borrower, and as such will be an easy and quick way to get numerous quotes from a variety of lenders. Visiting the website of a broker could also offer exclusive deals from lenders not offered directly to borrowers. Homeowners and home buyers could also go website to website of lenders to check rates and gather quotes. 

While it is unknown when the MPC will vote for a rate cut, it is expected for there to possibly be two cuts before the year closes. There has not been a vote to reduce the base rate since March 2020. Lower interest rates along with inflation under control will be welcomed by all as the economy will have taken a major turn from the long financial struggles that began with Brexit and later followed by the global pandemic.

Experts are encouraging borrowers to consider current deals rather than wait for the MPC to cut the base rate. By shopping around, they could discover a deal that one might have expected to find after the MPC cut the base rate. 

When the committee votes to reduce the base rate, it will likely be a small cut. The expectation is for 0.25% to take the rate to 5.0%. Lenders might already have their best deals available. 

While some lenders have been pulling their lowest deals as the forecasts postponed a vote from the MPC to cut the base rate, there are those that have restrained and even others that have edged their deals downward. 

It might be a smart strategy to borrow now rather than wait for better deals that perhaps are already available. 

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