A third of consumers now feel negatively towards future cuts to the Bank of England Base Rate. Since August, savings rates have fallen and mortgage rates have only reduced marginally, according to Moneyfacts analysis.
36% feel negative towards a potential cut in Bank Rate, showing that the reductions continue to be a double-edged sword.
Despite a cut of 0.25% to Bank Rate in August, fixed mortgage rates went up, not down, as lenders increased rates during September. Due to falling swap rates in October, fixed mortgage rates have dipped back down, but such volatility shows how sensitive the mortgage market is surrounding economic uncertainty. The Moneyfacts average mortgage rate has fallen by just 0.05% in the past three months.
In addition, real returns on variable rate savings accounts continue to deteriorate, with easy access, notice and cash ISA equivalents paying less than the current inflation rate of 3.8%.
Rachel Springall, finance expert at Moneyfacts, said: “Dividing thoughts among consumers on further cuts to the Bank of England Base Rate is understandable. Borrowers may expect cheaper mortgage rates as a result, which is not guaranteed, and savers end up hit the hardest. Savers are already seeing negative returns on their hard-earned cash if it’s stashed in a pot they can quickly access, so it’s no wonder if they feel demoralised.
"It’s important to remind borrowers to not delay refinancing, such as waiting for more Bank of England Base Rate cuts, because fixed mortgages are more intrinsically linked to swap rates. As shown in average rates, fixed mortgage increases were en masse during September, the swap market was not looking favourably on future interest rate decisions. Thankfully, the recent falls have led lenders to review their pricing, with many reducing rates. The incentive to switch from a revert rate to a two-year fixed deal could save borrowers £358 per month on their mortgage repayments.
“The Budget rumour mill to abolish stamp duty can cause confusion among borrowers, with new buyers adopting a ‘wait and see’ stance. The proposals on paying tax put the burden on sellers, rather than buyers. While this may be a significant change for first-time buyers, it will impact those looking to sell-up, such as those who need to downsize. Unfortunately, if this does come into play, alongside rumours around removing CGT exemptions on primary residences, it could lead to homeowners refusing to move, hitting supply. The other suggestions are to introduce a ‘mansion tax’, a yearly tax levy on high valued properties. Unsurprisingly, the controversy around such property tax changes could steer sellers to feel rushed, but they should always seek advice before making any rash decisions.”
