Exact dates interest rates expected to be cut this year in new mortgage boost for millions
MILLIONS of homeowners are set for a boost to their finances as interest rates are set to be cut this year.
The Bank of England (BoE) has increased rates steadily for nearly two years now, with rates currently standing at 5.25%.
The central bank has opted to hold rates at 5.25% twice in a row.
At the beginning of 2023, interest rates stood at 3.5%.
And financial markets are now betting that the BoE will launch a deep round of interest rate cuts this year amid the growing risk of a recession.
The central bank was forced to increase rates to tackle soaring inflation, which peaked at 11.1% in October last year.
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The annual rate at which prices are rising slowed to 3.9% in November, down from 4.6% in October this year, according to the Office for National Statistics (ONS).
The current rate is still almost double the BoE's target of 2%.
High rates are meant to dampen demand and spending — resulting in inflation slowing.
But they also mean the cost of debt paid by households, borrowers and the government is more expensive.
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About five million mortgage holders have moved to a new fixed-rate deal since interest rates started rising in late 2021.
In that time, the number of mortgage arrears has jumped as cost of living pressures and higher rates on home loans bite.
A further five million homeowners are still due to face higher borrowing costs by the end of 2026, according to the Bank.
Thomas Pugh, an economist at audit and consulting firm RSM UK, said an estimated 1.6million households are set to remortgage to sharply higher rates in 2024 alone.
With this in mind, millions of homeowners will want to know what will happen with rates in the future.
Falling inflation has led many economists to predict a rate cut as early as spring this year, which would be at the Monetary Policy Committee on March 21.
Despite the Bank’s insistence that rate cuts are not yet on the cards, many experts believe slowing wage growth and sharply falling inflation will give policymakers room to start reducing in the first half of the year.
The rate of unemployment is expected to pick up to 4.8% from 4.2% in the three months to October 2023, according to some economists, as the economic uncertainty takes its toll on the jobs market.
The EY Item Club is pencilling in the first rate cut to be on the cards from the spring of 2024 as it cautions over a "risk that policymakers keep policy too tight as primarily global forces push inflation down".
While the timing is uncertain, most experts agree that rates are likely to come down in the year ahead.
Laith Khalaf, head of investment analysis at AJ Bell said: "Much of course depends on the path of inflation, which is driven by many variables that are difficult to predict in isolation, let alone together.
"That’s especially against a background of monetary policy going from nought to 60 in a painfully short space of time, with much of the attendant effect on the economy yet to play out."
The BoE is also expected to lower rates six times in 2024 starting in May, according to the .
It reported that Andrew Goodwin, chief UK economist at Oxford Economics consultancy, said the November inflation reading should be a "game changer" for UK monetary policy, adding that while the BoE would be nervous about upcoming pay negotiations, he expected the bank to start lowering rates in May on the 9th.
Back in November, Huw Pill, chief economist at the Bank, said that it was “reasonable” for markets to predict a rate fall in the summer.
The US Federal Reserve and the European Central Bank are also expected to cut rates in the coming months.
How to get the best deal on your mortgage
If you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
But there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you're remortgaging and your loan-to-value ratio has changed, this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
If you have a fixed rate, you could see higher rates when you come to the end of the current term after thirteen Bank rate rises since December 2021.
And if you're nearing the end of a fixed deal in the next six months it's worth contacting your broker now to lock in a rate.
If they come down between now and the end of your deal, you can always apply for another rate before you remortgage.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal - but compare the costs first.
To find the best deal use a to see what's available.
You can also go to a mortgage broker who can compare for you, with most offering free advice to secure you the best deal for you.
Some brokers charge for advice, so ask them first.
It could cost a couple of hundred pounds but it might save you thousands on your mortgage overall.
You'll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it to the cost of the mortgage, but beware that means you'll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember, if you decide to remortgage to a new lender you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three months' payslips, passports and bank statements.
It's possible to avoid new affordability checks by remortgaging to a new deal with your existing lender, providing you don't want to borrow more or extend your term.
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Meanwhile, we reveal what will happen to interest rates in 2024 and what it means for your mortgage.
Plus, millions of Brits will want to be in the know ahead of 17 money changes set to hit this year.
You can also join our new Sun Money to share stories and tips and engage with the consumer team and other group members.