Homeowners are warned mortgage deals won’t get much cheaper, even if the Bank of England cuts interest rates.
An expert has suggested that the two-and five-year fixed rate deals currently available have already ‘locked in’ any cuts that could come.
Charlie Nunn, chief executive of Lloyds, Britain’s biggest mortgage lender, has warned borrowers not to expect cheaper deals if the Bank of England cuts interest rates.
He said: “Our expectation is, unless there’s a material shift in expectations around future interest rates, that mortgage pricing is going to stay pretty stable.
“There are mortgage offers today at around for four per cent so customers are already getting significant value.”
Interest rates have remained frozen at 5.25 per cent since August 2023.
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Interest rates have remained frozen at 5.25 per cent since August 202
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Mortgage holders will be hoping that the next move will be down, especially after inflation held at two per cent in the 12 months to June.
Most analysts think that interest rates have peaked, and will soon start to fall, with current market expectations placing the first cut by September at the latest.
Borrowers on deals set at a fixed rate for the first few years of the loan will not be affected by changes in the Bank rate. That means borrowers taking fixed deals today are already enjoying rates that are lower than the 5.25 per cent Bank benchmark.
These savers are unlikely to see much benefit when the Bank does cut interest rates.
The average forecast shows rates at 4.5 per cent by the end of the year, while according to analysis by research firm Capital Economics, rates will hit four per cent by the end of 2025.
Millions of UK homeowners will be hoping for the Bank of England to cut interest rates on August 1 so they may see a reduction in their monthly mortgage payments.
Jo Pocklington, managing director of Purplebricks Mortgages believes the decision next week will be a “very close call”.
The future of interest rates depends significantly on how quickly inflation drops and remains stable.
Wage growth, unemployment and services inflation seen by many as the main indicators of when this will happen.
She said: “Although inflation held steady at a controlled two per cent service inflation remains high at 5.7 per cent – with the main impact stemming from higher hotel costs and of course the “Taylor Swift” effect.
“Homeowners on a tracker or variable mortgage will feel the biggest and most immediate benefit from a BoE rate cut. Customers on a fixed mortgage will see no change to their payments.
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“If the BoE decides to hold rates in August, that will certainly increase the likelihood of a cut in September.
“My advice would be to speak to a good and trusted mortgage broker and have all of your options explained to see if you should stick or twist in line with the BOE.
“The key thing to do is be vigilant to change and make sure you’re in the best position possible regardless of the decision.”