Bank of England base rate remains at 5.25% - a blow to borrowers?

The latest decision comes as average mortgage rates continue to rise steadily.

The Bank of England base rate remains at 5.25% following today’s Monetary Policy Committee (MPC) meeting; the nine-person party voted 7 to 2 in favour of holding the UK’s central interest rate at its current level as it seeks to further reduce the rate of inflation.

With this marking the sixth consecutive time the base rate has gone unchanged since August 2023, mortgage borrowers coming off a fixed rate, or prospective first-time buyers looking to get on the property ladder, may anxiously be awaiting a cut before they look to secure a deal.

However, with forecasts quelling expectations of any imminent change to the base rate, and the swap market remaining volatile, many lenders have been busy reviewing their product ranges and adjusting their prices accordingly.

As a result, despite a promising start to the year, average mortgage rates have climbed steadily over recent weeks. The average two-year fixed rate rose to 5.91% at the start of May – up from 5.80% the previous month. Meanwhile, the average five-year fixed rate increased from 5.39% to 5.48% across the same period.

Although rising rates may deter some from shopping around, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, reminded borrowers that fixed rates remain lower than six months ago, when the average two-year deal cost in excess of 6.00%.

“Consumers who are now coming off a two- or five-year fixed mortgage would be wise to act quickly to grab a competitive deal, particularly as some lenders have withdrawn deals priced below 5%,” Springall added.

This is a sentiment echoed by Oliver Dack, Spokesperson for Mortgage Advice Bureau. “It could still be some time until we see a cut to the base rate and even longer before mortgage rates drop significantly,” Dack explained. “In the meantime, those borrowers determined to ‘wait it out’ before locking into a fixed deal could face more expensive repayments as they sit on their lender’s Standard Variable Rate.”

The average Standard Variable Rate stood stubbornly at 8.18% at the start of May – unchanged from the previous month. At this rate, borrowers would be paying around £290 more each month compared to those on a typical two-year fixed rate (based on a £200,000 mortgage over a 25-year term).

“While there’s been no change to the base rate for nine months, the good news for borrowers is this has given the market time to stabilise following the 14 consecutive hikes between December 2021 and August 2023,” Dack concluded. With plenty of attractive offers still to be found, he encouraged those needing help searching for a new deal to seek advice from a mortgage broker. Alternatively, existing customers may want to speak to their lender if struggling to meet repayments.

What about the savings market?

In contrast, savings rates have proven more resilient. Both the average rate paid by an easy access account and a notice account held steady at 3.11% and 4.27%, respectively, between April and May. Meanwhile, average easy access ISA returns have fallen over recent weeks following a positive ISA season, but remain higher than six months ago.

“Challenger banks and building societies continue to offer the top easy access rates, so savers would be wise to review their account and switch if their loyalty is not being rewarded,” reminded Springall.

She added those consumers worried about a potential cut to the base rate and the upheaval this could cause in the savings market may also want to review their existing pots and consider grabbing a deal quickly.

 “As is evident, many of the top rate deals can be cut or withdrawn quickly if providers are facing an influx of deposits so savers need to keep a close eye on the top rate tables not to be left disappointed.”