There was some much-needed festive cheer for homebuyers and those looking to remortgage this week after the Bank of England’s Monetary Policy Committee voted 5-4 to cut the base rate to 3.75%.
The last time the base rate was lower than 4% was in December 2022. It then rose to 5.25% by August 2023. There have now been six quarter percentage point rate reductions since August 2024, with markets expecting a further cut by the end of March next year.
December’s rate reduction was widely expected after the first fall in inflation in five months in the year to October. The Consumer Prices Index measure of inflation slowed to 3.2%, aided by smaller rises in household energy costs and lower hotel costs.
Boost for borrowers
Several lenders, including Nationwide, Halifax and NatWest, announced they were cutting their fixed mortgage rates prior to the rate reduction, with average mortgage rates now lower than they’ve been since prior to the mini budget in 2022. The average five-year fixed rate has dipped below 5% for the first time in more than two years.
It’s important to note that these are average rates and that much lower fixed rate deals are available, especially for borrowers with substantial deposits or a large amount of equity if remortgaging. For example, best-buy two-year fixed rates for those with a 40% deposit (or equivalent equity) are currently close to 3.50%.
Since the most competitive rates often don’t hang around for long, it’s worth acting quickly if you find a mortgage that fits your needs. Many lenders allow you to lock in a mortgage offer up to three or six months in advance.
If you’re unsure about fixing your rate now, L&C’s Rate Check service allows you to secure a rate today, while still giving you the option to review and switch to a better deal if one becomes available before your mortgage completes.
