Now is the time to buy a new Russell Home
On the 1st August, The Bank of England (BoE) voted to cut the cost of borrowing for the first time in over 4 years. We have seen the base rate reduce from 5.25% to 5% in their most recent update, helping to reduce mortgage rates.
How does this affect my current mortgage?
Everyone has a different mortgage deal, so, it’s important to know which deal you are on and if this is or will be affected by the new base rate.
If you are on a fixed rate mortgage, which most people in the UK have, there won’t be any change to your monthly payments. However, if you are coming to the end of your fixed rate term, then your monthly payments could change based on the new base rates. You might want to check in on new deals at this point to see the best rates you can receive.
A tracker mortgage customer will see a change in their monthly payments. This mortgage deal means your monthly payments fluctuate based on the lowest BoE rate. Your next mortgage payment will be reduced, in line with the new rate.
Variable mortgage rates means that you will only be affected by the new base rate if you were to remortgage your property and choose a fixed term rate or a tracker mortgage. As per the above, your new mortgage will then follow the new BoE rate. The average variable mortgage rate across all lenders is 8.49%.
Does this help me buy a new home?
Although the new base rate won’t affect new build house prices, it will reduce your mortgage rate, unless fixed, and therefore reduce your monthly payments.
The new base rate will make it more affordable to get a mortgage in terms of borrowing, so you can now borrow for less when getting a mortgage. It is a good time for people in the new home market to start looking at securing their decision in principle and getting themselves on the property ladder.
We have seen the arrival of the first sub 4% rate over the last several months, for borrowers with larger deposits and we expect to see more banks joining them in weeks to come. We are still waiting for banks to release any news off the back of the new base rate.
The next decision on interest rates is expected to be announced on the 19th September 2024.