Interest rates

As we have previously covered, interest rates have been high for some time now due to the persistently high inflation seen over the last couple of years.

One of the main strategies used by the Bank of England to control inflation is to raise interest rates. This happened 14 times in a row from December 2021 in a bid to curb inflation. Which at one point was running as high as 11.1%, the highest rate seen for 41 years.

High inflation impacts upon the affordability of goods and services. But the knock on of raising interest rates is that it makes mortgage rates more expensive as these tend to follow the Bank of England’s base rate.

The good news for mortgage borrowers is that there seems to be some signs of recovery. The base rate has been frozen at 5.25% since August 2023. And the latest figures show that inflation has fallen to around 3.5%. This still means that prices are rising a little too fast, with the Bank of England’s target rate being 2%. This has led to a lot of mortgage lenders offering lower rates than have been seen over the last two years.

We are not yet back to the historically low rates seen during the Covid pandemic. And it is not expected that we will see those rates again for some time. But the signs are that things are moving in the right direction. It’s widely expected that rates will remain frozen or even drop slightly over the course of the next 12 months.

All this is good news for first-time buyers, and people looking to move or remortgage their properties. They should be able to benefit from lower rates than have been seen over the last two years. There have also been price drops over the last twelve months. Which may help first-time buyers, who could see this dual benefit make properties more affordable.

The outlook for the next twelve months is looking much more positive than it has done in recent times. But as always, we recommend speaking to a licensed mortgage adviser who will be able to give you tailored advice based on your specific circumstances. If you would like a list of people who may be able to help you in the buying process, head over to our buying pages.