Mortgage Rates: Why Banks Are Cutting as the Base Rate Holds

If you've been watching mortgage rates this autumn, the last few weeks have been confusing. Some of the biggest names on the high street have cut their fixed rates, while the Bank of England hasn't touched the base rate since the summer. So what's going on, and what does it mean if you're buying or selling in Bradford?

The base rate: on hold at 3.75%, for now

The Bank of England last met on 17 September and held the base rate at 3.75%. It wasn't unanimous: three of the nine members on the committee voted to raise it to 4%.

There was no decision in October. The next one is on Thursday 5 November, and I'll be honest with you, most of the market expects a rise. Inflation went up to 3.5% in September, and that's exactly the kind of number that makes the Bank nervous.

So why are some banks cutting?

This is the bit that catches people out. Fixed-rate mortgages aren't priced off the base rate. They're priced off what it costs the banks to borrow money for two or five years, and that moves every day with the markets.

In October, a number of big lenders decided they had room to sharpen their deals:

• Santander cut selected fixed rates by up to 0.25% from 6 October
• Halifax trimmed selected rates by up to 0.10% from 9 October
• HSBC and NatWest both cut across their ranges from 15 October

Not everyone has followed. Some lenders have been putting rates up at the same time, and the overall averages have barely moved. Moneyfacts put the average two-year fix at 5.96% and the average five-year fix at 5.99% on 19 October. The five-year average touched 6% earlier in the month, the first time in around three years.

So the real picture is a mixed one: the best deals are a little better than they were a month ago, but the average borrower isn't paying much less.

What this means if you're buying

If you're buying, the gap between the best deal and an average deal is where the money is. A good broker earns their fee right now, because who you borrow from matters more than usual.

If you already have a mortgage offer, or an agreement in principle at a rate you're happy with, check how long it lasts. Most offers can be held for around six months. With a decision due on 5 November, a rate you have in your hand is worth something.

What this means if you're selling

Buyers are still out there and still moving, but they're budgeting carefully. A buyer working to a monthly payment notices every fraction of a percent, and that feeds straight into what they'll offer.

That's why pricing right from day one matters so much this autumn. A home that launches at the right figure gets the attention while buyers are active. One that starts too high and chases the market down usually ends up selling for less than it would have done first time round.

My honest take

Nobody knows exactly what the Bank of England will do on 5 November, and I'm wary of anyone who tells you they do. What I can tell you is that people are still buying and selling homes in Bradford every week, and the ones who do best are the ones who plan around the numbers rather than wait for them.

If you're thinking about a move and want to talk it through, with no pressure and no hard sell, give me a call. I'm always happy to have a chat.

Thinking of moving? Get a free, no-obligation valuation at valuation.michaelbrownsett.exp.uk.com or call me directly on 01274 955 559.