The Bank of England’s decision to raise the base rate to 4% will put tracker rates above some fixed rate products for the first time since the mini-budget.

The UK property market had a bright start to the new year.

The number of prospective buyers contacting agents rose 4% in the first two weeks of the year compared to the same period in 2019 and climbed 55% compared to the fortnight leading up to Christmas, according to Rightmove. Meanwhile, the January survey from IHS Markit revealed that household views on the current trajectory of house prices rebounded into positive territory following two consecutive contractions.

Falling mortgage rates were the primary reason behind the change in sentiment. The cost of many fixed rate products soared above six percent following the former Chancellor’s mini-budget speech on September 23rd. Rates have eased since, and the best five-year fixed products can be found as low as 4.19%, while the best trackers sit around 3.94%.

The Bank of England today increased the base rate by 50 basis points to 4%. The move was largely priced in to fixed rates, so we don’t expect much movement during the days ahead. Tracker products will move upwards and many will now be more costly than the best fixed rate products for the first time since the mini-budget.

For borrowers, a popular strategy in recent weeks has been to wait on penalty-free tracker products for fixed rates to bottom out. That day is unquestionably near and may in fact have arrived already. The certainty of fixed rate products at lower rates than trackers will no doubt entice large numbers of borrowers to fix. Others will opt to remain on tracker products for interest rate cuts that economists expect will begin between Q4 2023 and Q1 2024.

What is right for you will depend on your financial circumstances and appetite for risk.

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