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On 7th November 2024, the Bank of England lowered the base rate to 4.75%.
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What is a base rate?
The Bank of England charges banks and lenders interest when they borrow money from them. This interest is known as the base rate, or bank rate. This rate directly influences the interest charged by banks and lenders to individuals borrowing money, as the interest rate charged by banks and lenders for personal loans will always be higher than the base rate.
What is the base rate currently?
As of 7th November 2024, the base rate in the UK was reduced to 4.75%. It was previously held at 5% in the September, which followed first cut in the base rate that we have seen since it started to rise in December 2021.
What does this mean for you?
The Bank of England uses the bank rate to encourage or discourage spending, depending on the state of the economy. A higher base rate means borrowing becomes more expensive and the interest on loans and mortgages increases, meaning they are harder to get. Lower base rates, however, are used to encourage spending as borrowing becomes cheaper.
There is an advantage of a higher base rate, because interest-based saving accounts earn a higher rate of interest, you’ll earn more on the money you can save.
A lower base rate, or when it is reduced, encourages spending, as the borrowing rate is lower. This is good news for first-time buyers, looking to get onto the property market, and home owners, who might be looking to move home or remortgage.
What does this mean for your mortgage?
For those who are trying to get a mortgage or have existing mortgages, the base rate decreasing can bring more certainty for mortgage lenders and could mean better mortgage rates.
If you are on a tracker or variable mortgage, a reduced base rate means that your monthly repayments could also reduce.
If your fixed-rate mortgage is coming to an end, be sure to look into whether you should remortgage, and do so before your contract comes to an end, as you could secure a better rate. It may also be beneficial to look at moving to a mortgage type which has more stability, just in case of future rises.
It’s always best to speak to a financial advisor for advice specific to your circumstances, as they will be able to provide you with all your options. When it comes to remortgaging, you will often need a conveyancer to act on your behalf. Use our online calculator to get a personalised remortgage quote in minutes.
It’s important to learn about the different types of mortgages on offer, to work out which is best suited for you.
Previous updates:
On 19th September 2024, the Bank of England held the base rate at 5%.
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