This Thursday (8 August), the Bank of England will announce its latest decision on the base rate, which is currently 4.25%.
The base rate is the interest rate set by the Bank of England, it influences how much it costs to borrow money or how much you earn on savings. Mortgage lenders use the base rate to help set their own interest rates. So, when the base rate goes up, mortgage rates often rise too. When it goes down, borrowing (including mortgages) tends to get cheaper.
Most experts are predicting the Bank will cut the base rate slightly – to 4.00% to help support the economy. This could be good news for first time buyers, as a lower base rate can lead to lower mortgage repayments, especially if you’re looking at a tracker mortgage or a new fixed-rate deal.
Commenting on the Bank of England’s upcoming base rate decision, Colin Bell, Founder and COO of Perenna said: “A cut this Thursday will mean one thing for certain – the housing market will continue to heat up. For existing owners wanting to sell and upgrade their home, or older generations cashing out and downsizing for their retirements, this is music to their ears. For first time buyers, it’s more like a screeching violin solo they’re being told they should enjoy.
“Another cut to rates will simply pour petrol on a long-burning fire of rising house prices – great for owners, disastrous for buyers trying to get on the ladder for the first time. As rates fall in an effort to stimulate economic growth, we need to take off our rose-tinted glasses and be honest with our young people. The big blocker on housing affordability is the overall price, not the monthly payments. Many young people are already paying a small fortune in rent. We should stop acting like rate drops are a silver bullet solution to their housing woes. In fact, a rate cut this Thursday might just be the worst thing possible for first time buyers who simply can’t get over the house price hurdle, let alone secure a low-rate mortgage. We need innovation in the market to change the status quo – whether that is lower deposits, changing stamp duty, continued regulatory reform including LTI cap changes, different products or something else entirely, we cannot keep going as we are and expect different outcomses”.
If you’re planning to buy your first home, it’s worth keeping an eye on this announcement, as it could affect what kind of mortgage deals are available – and how much you could end up paying each month.
Sophie Clark is a university-educated professional with a degree in Childhood Education. After building a strong foundation in early years education, she progressed to the role of Early Years Manager, where she honed her leadership and organisational skills. Seeking new challenges, Sophie transitioned into the world of media and events, joining First Time Buyer magazine. In this role, she has gained extensive experience in digital marketing, content creation, and event management. Alongside her work with First Time Buyer, she also operates as a freelance digital and events specialist.
