Global inflation looks increasingly benign, paving the way for more mortgage rate cuts in the weeks ahead.
The Bank of England’s Monetary Policy Committee voted to hold the base rate at 5% on Thursday, citing a lack of clear evidence that inflation is beaten.
The decision is unlikely to deter lenders from cutting mortgage rates during the weeks ahead. The price of mortgages is linked to the outlook for inflation in the months and years ahead, and that outlook has remained largely unchanged for several weeks.
Indeed, inflation looks increasingly benign across Western economies, and central banks are likely to pick up the pace of rate cuts in the months ahead, provided current trends persist. In the US, where mortgage rates have eased to their lowest since February 2023, the Federal Reserve on Wednesday opted for a bumper 50 basis-point cut to its key interest rate.
These conditions will be welcomed by borrowers who have endured three years of volatility in the mortgage market. Since the Bank of England began hiking rates in 2021, the sales market has been dominated by people who need to move, but the improving outlook will coax more discretionary buyers into acting. It is likely to be a busy autumn in the UK property market.
The best five-year fixed-rate products are now below 4%. The best two-year rates at 75% loan-to-value sit around 4.20%. For anybody seeking to remortgage or purchase a home during the months ahead, we recommend getting financing in place well ahead of time. Mortgage offers are generally valid for six months and can be renegotiated if better deals come available later.
Markets expect the Bank to execute one or two more rate cuts this year – potentially at both the November and December meetings - though that will depend on how the inflation data progresses. Either scenario should be enough to help usher in sub-4% two-year fixed-rate mortgages.
The Bank’s forecasts suggest inflation will pick up a little during the final months of the year before falling below the 2% target during the following two years. That means those opting for two-year fixed rates today can look forward to remortgaging at a lower rate at the end of their term.
If you are considering purchasing or remortgaging a home, please get in touch with one of our experienced brokers. We have relationships with over 200 lenders and we’d be happy to walk you through your options.