Bank of England Reduces Base Rate To 5%

The Bank of England has today announced its first cut in the base rate since March 2020, with 5 MPC members voting in favour of a reduction. Many economists had speculated whether August may have come too soon for a majority, with only 2 members voting to lower at the last meeting in June.

Lenders, however, had been preempting a reduction to base rate, with July seeing the longest sustained period of reductions since January this year. Nationwide have introduced sub 4% mortgages on a 5 year Fix basis, with a number of other changes at different loan to value brackets. 80% LTV first time buyer products were starting from 5% at the beginning of June, headline rates are now 4.85%.

There has also been positive changes for remortgage customers, as well as clients looking to switch product with their current lender. Market leading rates for a 75% remortgage product were 4.89% before reductions and are now starting from 4.77%.

Perhaps unsurprisingly, the only largely unchanged products are at top end loan to values, with 90% first time buyer products tracking close to the base rate of 5.25% since April. The little movement in rates seen at higher LTVs means these customers may well come out best in terms of reductions following today's announcement.

So what does that mean for mortgage rates from here? It's possible there will be smaller incremental changes to lender rates generally in the immediate future. With the July reductions pricing in one base rate reduction, further cuts will have to materialise before 4% rates become a common theme across all lenders.

In any case, the start of rate reductions across lending brackets is good news for all mortgage borrowers.

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