4 November 2021

Bank of England holds interest rates

The Bank of England announced at today’s meeting that interest rates would be held at 0.1 per cent for another month. The news comes as a surprise as the markets had priced in a modest rate rise, as inflation is expected to average 4 per cent next year, well above the Bank’s 2 per cent target.

While most forecasters expected a rise today, it may only be a matter of time before the rate setters make their move. The delay gives borrowers on variable-rate mortgages time to get their ducks in a row and consider moving over to a fixed-rate deal.

However, borrowers will find that lenders have pulled many of their cheapest mortgage rates already, with those 60 per cent loan-to-value (LTV) sub-1 per cent deals having all but disappeared. Repricing on higher LTV mortgages is not happening just yet (these mortgages are relatively more expensive anyway, particularly at 90 per cent LTV) but that is likely to come in time.

The vast majority of borrowers are on fixed-rate mortgages, as these have been so competitively priced recently, and will be safe should interest rates rise. Those on variable rates who are worried about an uptick in their mortgage payments, may wish to consider the security of a fixed rate. A chat with SPF Private Clients is a good place to start, in order to find out what options are available to you. This is particularly the case if you think you are a mortgage prisoner, unable to remortgage from your lender’s expensive standard variable rate. You may be pleasantly surprised.

It is also worth remembering that while there is some upwards tweaking of mortgage rates going on, lenders still have plenty of money to lend. They will need to offer competitive rates to attract business, which is good news for borrowers. There is certainly no need to panic, even if the days of interest rates at 0.1 per cent may be numbered.