Experts predict and report that mortgage interest rates could drop below 3% and increasing activity within the property investment market.
The Bank of England kept its base rate unchanged yesterday but hinted at a potential cut in the future. The Monetary Policy Committee (MPC) will meet again in November. Governor Andrew Bailey noted that inflationary pressures are easing, suggesting that rates could be reduced gradually if this trend continues.
In anticipation of further cuts, lenders have intensified competition on fixed-rate mortgages. Some two- and five-year fixed deals are already just above 3.80%. Brokers believe that if inflation remains low, some lenders might offer sub-3% deals next year. This would be a welcome relief for both new mortgage applicants and those looking to refinance. However, many households are still recovering from the shock of having to remortgage at higher rates after the Bank raised its base rate to 5.25% to combat inflation.
As interest rates continue to decline, a rush to the lowest rates has begun. This could be the start of a larger downward trend. We might soon see mortgage rates starting with a two. A mortgage rate close to sub-3% is very possible by the end of next year. A sub-3% interest rate would be likely raise the interest of those sitting on the fence when it comes to property investing.
Eight out of nine MPC members voted to keep the base rate at 5% yesterday. This follows a recent cut from 5.25%, the first reduction since 2020. Laura Suter, director of personal finance at AJ Bell, noted, “Interest rates are still expected to end the year at 4.5%, indicating two more cuts before Christmas.”
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