Looking Ahead

Over the last few months, there has been a general improvement in the Mortgage Rates on offer. Following the Budget, some rates have increased slightly, but we’ve now had a 0.25% reduction in the Base Rate. It’ll be interesting to see how this plays out over the next few months.

Overall, a number of other factors have already come together in the UK to create a more encouraging environment.

A reducing level of inflation (down to 1.7%); annual UK house prices continuing
to show an increase (up annually by 2.4%), and sizeable enthusiasm amongst lenders to compete for your business.
(Sources: Office for National Statistics, CPI, 16 October 2024; Nationwide, House Price Index, October 2024)

Base Rate reduction

With the 0.25% drop, the Base Rate now stands at 4.75%, and this means:

Those on Tracker deals are likely to see an immediate benefit, as their interest rate should be influenced by the Base Rate reduction.

Those on Fixed Rate deals will not see any changes to what they pay, until they come to the end of their deal period.

Those seeking a mortgage, or looking to remortgage onto a new deal may benefit from lenders responding to the lower Rate.

Of course, the fallout from the Budget, with the financial markets not initially responding positively, may still influence future Base Rate decision-making.

As for the Budget…

The outcome of the Budget will result in an extra £70bn of annual spending.

This extra amount, according to the Office for Budget Responsibility, will result in inflation being slightly higher than expected (2.6% in 2025, for example). With regard to the Base Rate, this is still expected to fall, but not by as much as previously predicted (in the realms of 3.6% to 4.7% for 2025). This would probably then have an impact on mortgage rates.

Also, to meet the extra spending plans, £36bn will come via higher taxes, with the following being the main areas targeted:

– National Insurance (for employers)
Around £25bn is expected to come from an increase in Employer NI contributions, applicable from April 2025.

– Stamp Duty
For those buying an additional home (such as landlords), the 3% surcharge they already faced was lifted to 5%, with immediate effect.

Also, after a period of reduced Stamp Duty charges, all purchases will return to
the normal rates from 1 April 2025
Stamp Duty is applicable to England and Northern Ireland.

– Capital Gains Tax (CGT)
The sale of shares and assets will now face the same higher CGT bands as those applicable to additional homes. This means they are increased from 30 October 2024 from 10% to 18% for basic rate taxpayers, and 20% to 24% for those on a higher rate.

– Inheritance Tax
The current thresholds will remain as is, but will be frozen at that level for a further two years, until 2030, drawing more into the net.

– Income Tax
This is untouched, but the thresholds at the moment are frozen until 2028, creating a fiscal drag (as it generates a bigger tax take as incomes rise). But from 2028/29, the thresholds will then rise in line with inflation.
(Sources: HM Treasury, October 2024; Office for Budget Responsibility, Economic & Fiscal outlook, October 2024)

Lender Rates

Across this year, we’ve had yo-yo periods with regard to rates on offer.

Whilst the ‘average’ fixed rates for a 2-, or 5-year deal currently start with a ‘5’, better rates that begin with a low ‘4’ (or even 3!) may be on offer. This is generally applicable to loans of 60%, or less, than the value of the property.

Whatever your situation, it’s likely that the comparative rate for those coming off 2-, and 5-year deals, will result in a bit of a price shock, although not as bad as it would have been a number of months back.
(Source: moneyfactscompare.co.uk, November 2024)

Swap Rates

To some extent the fluctuating rates are down to the impact of Swaps, which have
a big influence on the pricing of Fixed Rate mortgage deals. There was an uplift, following the Budget, which then levelled off around the Base Rate reduction.
(Source: Chatham Financial, Swaps, 7 November 2024)

Whatever your situation, we’d fully assess the suitability of the options on offer. And you can take comfort from the fact that we operate in this sector day-in day-out, plus have the qualifications and expertise to deliver advice that meets your needs.

Your property may be repossessed if you do not keep up repayments on your mortgage.