Mortgage timebomb: Bank of England's interest rate cut is welcome news for home buyers
The Bank of England cut interest rates by 0.25 per cent today, taking them to 4.75 per cent — in what is only the second cut made by the Monetary Policy Committee (MPC) since the pandemic.
Home buyers hoping to secure a mortgage in the coming months may feel relief at today's cut, so too will the millions of homeowners with variable-rate loans. Mortgage holders on fixed rates, however, will see no change until they come to refinance or move onto their lenders variable rate.
After holding interest rates at 5.25 per cent for longer than expected in early 2024, the MPC "finally" voted to cut the base rate to five per cent on 1 August 2024. This was followed by a hold at five per cent at the next meeting on 19 September.
Even with today's cut to 4.75 per cent, homeowners who took out five-year fixed-rate loans during a period of ultra-low interest rates just before the pandemic are likely to find themselves facing a 'mortgage timebomb' when they refinance or move to variable rates in the coming months.
However, it is a sign of recovery, and Dominic Agace, chief executive of leading estate agents Winkworth, said, "A further reduction is welcome and after a small wobble around the Budget , provides reassurance that the property market will continue on the path to recovery. We have seen applicants register to buy 12% ahead of last year and 9% ahead of the 3 year average, down from 18% and 11% in the the weeks before. We would expect this positive and anticipated step to reverse this slight drop."
Nathan Emerson, CEO of Propertymark thinks that the news will start lots activity before the new Stamp Duty thresholds hit next April:Today's announcement will be welcome news for buyers, especially for those who may have been delaying any house move due to potential uncertainty on their overall affordability. With the Bank of England's most recent Money and Credit Report revealing net mortgage lending has further increased by 0.9 per cent in September, up on the 0.7 per cent seen in August, coupled with proposed changes to Stamp Duty thresholds from next April, it's highly likely we may see buoyant activity in the market across the winter months."
