There is almost zero chance the Bank of England’s Monetary Policy Committee (MPC) will cut the standard base interest rate this month. The next meeting is on 9 May and will likely end with a majority vote for keeping the rate steady at 5.25%. Inflation is dropping, but not yet at the Bank’s target rate of 2.0%. It is nearing the point where the rate will be cut, but not likely until early autumn. Expectations are for at least one rate cut of 0.25% by the end of the year.

The last MPC meeting, held in March, signaled the likelihood of a rate cut on the horizon. It was the first time in over two years a member of the MPC did not vote to increase the base rate. One member voted to decrease the rate, while the majority voted to keep the rate set.

Inflation is now at 3.2% and as stated earlier, the target for inflation is 2.0%. As reports of inflation reveal it is declining closer to the target, a cut will be likely. According to the governor of the Bank, Andrew Bailey, the MPC’s strategy is working to bring inflation under control and the expectation is for the next inflation report to reveal a strong decline.

In the start of the year, optimism for a spring vote to cut the base rate was expected. The number of cuts was thought to be a possible five or more this year. As inflation held on tighter than expected, optimism faded. 

The last time the rate was cut was in 2020 when the global COVID pandemic impacted the economy so severely the MPC lowered it to an all-time, more than 300 years, low of almost zero at 0.1%.

By December 2021, the pandemic had retreated into the background and inflation took center stage. The MPC voted for their first increase to the base rate and continued to vote for increases at each meeting until September 2023. It was then the expected peak rate to take inflation under control was held steady at 5.25%. It has remained and the financial strain on borrowers has caused affordability issues for both home buyers and homeowners.

Home buyers have found it ever more difficult to purchase a home as they are facing increased asking prices that rose to record highs time and again during the boost to the housing market caused by the pandemic lifestyle. House prices have remained elevated while inflation has taken a toll on the ability of hopeful home buyers to save for a deposit. With higher asking prices, long term inflation, and more expensive mortgage rates, getting on the property ladder is considered the hardest it has been in generations.

With the base rate being the highest it has been in sixteen years, homeowners are battling their own financial strains with borrowing. This is especially so for those coming to the end of fixed rate deals obtained during the pandemic influenced historic low lending rate period. For instance, in May 2022, the MPC voted to increase the base rate from 0.75% to 1.0%. Lending offers were reflective of the base rate and much lower than those currently available.

Homeowners coming to the end of their fixed rate terms obtained in 2022 will have the choice to remortgage or allow their lender to move them to their standard variable rate or SVR. The difference in their expiring rate and a new remortgage rate might seem shocking for a household budget, but allowing the transition to a SVR could be frightening. 

A SVR is considered risky for homeowners that would find it difficult to absorb higher repayments with little notice when the lender increases their rate. Lenders do not have to wait on the MPC to vote for an increase to make one to their SVR. This happened recently with mortgage rates and SVRs as lenders became concerned about the risk of lending and pulled their early year lowered rates reduced when optimism was high. In the last few weeks, lender rates have increased and SVRs more so.

While most homeowners will not find rates resembling their 2022 choices, choosing to remortgage could bring substantial savings by avoiding the costs of a SVR. This is why experts encourage homeowners to shop for a remortgage. It is fast and easy to do online, and quotes could be in hand in a matter of minutes. Brokers could offer many quotes from a variety of lenders and possibly exclusive offers. Homeowners could also go from website to website of lenders to gather quotes.

With quotes in hand, a homeowner could use the information to choose a remortgage or prepare for the near or far future. Knowing what offers are available now could help a homeowner determine how a remortgage could help.

Keeping mind that there might only be one cut to the base rate early in autumn helps a homeowner in knowing waiting out for lower rates and postponing a remortgage might not be the best option. The extra money spent on a SVR waiting to remortgage when rates decline could instead be saved. Choosing a remortgage is a better strategy rather than paying more than necessary.

By the start of next year, offers for homeowners could look like those available now since they are still climbing from the drop in offers when lenders cut their rates early.

Next week’s MPC meeting’s minutes will offer more insight as to what is expected in the coming months. Homeowners should be aware that if anything dampens optimism of a rate cut this autumn, perhaps pushing it off further into the year, or if this month’s inflation report does not show a steep decline, lenders could respond with higher rates than what are available today.

If a remortgage could be helpful to a homeowner, then shopping online should be a weekend project to make the most of opportunities available now.