Inflation is Falling But Cheaper Mortgages Are Still a Way Off

Inflation in the UK has dropped to its lowest level in nearly three years, but this does not necessarily translate to lower mortgage rates anytime soon. Despite the consumer price index (CPI) falling to 2.3% in April, higher than expected inflation means the Bank of England is unlikely to cut its base interest rate of 5.25% next month. Consequently, mortgage rates are expected to remain high, causing financial strain for homeowners with fixed-rate deals ending this year.

Key Points:

• Current Inflation and Interest Rates: Inflation is at 2.3%, close to the Bank of England's 2% target but still higher than forecasted, reducing the likelihood of imminent interest rate cuts.

• Impact on Mortgages: Homeowners with fixed-rate mortgages ending soon may face significantly higher monthly payments as new deals will reflect the current high interest rates.

• Variable Rate Mortgages: About 7% of borrowers have taken variable rate deals, hoping for future rate cuts. These deals, pegged to the Bank rate, will remain costly if rates do not drop.

• Mortgage Market Trends: While some lenders have cut fixed-rate deals slightly, analysts fear further reductions are unlikely. The potential for a July general election adds to the uncertainty.

• Expert Advice: Borrowers are advised to secure new deals early, preferably before their current ones expire, to avoid being moved to more expensive standard variable rates.

Practical Advice:

• Lock in Rates Early: Secure a new mortgage deal up to six months before your current one ends.

• Compare Deals: Evaluate both tracker and fixed-rate mortgages to determine the best financial strategy based on your situation.

• Consider Fees: Factor in any fees when comparing mortgage deals, as a deal with a higher interest rate but no fees might be more economical in the long run.

For more details, read the full article on The Times.