The Effect Inflation Rates Have on Mortgage Interest Rates

The Effect Inflation Rates Have on Mortgage Interest Rates

In recent times, homeowners having been dealing with the worry of rising costs due to an increase in the UK Inflation rate, which in turn affects the price of just about everything, including our mortgage interest rates. There is light at the end of the tunnel though.

Policymakers at the Bank of England increased interest rates for the past two years to help tackle inflation with the goal of reducing it to below 2%. In April 2024 UK inflation dropped to 2.3% from 8.7% during the same period last year according to the Office For National Statistics. If we continue along this trajectory, then there is the distinct possibility that UK interest rates could be cut as soon as this summer.

Whilst this reduction in inflation is welcome, sadly the UK is still behind expectations, meaning it is still going to be another few months before homeowners see the first reduction in their mortgage payments. It is now predicted that mortgage rates will fall in August. This will hopefully go a long way towards boosting the housing market and will be welcome news to those wanting to sell their home or buy their first home.

How will falling mortgage interest rates affect you?

For homeowners, falling mortgage interest rates will affect those on a variable mortgage rate. As the interest rate falls, so will your monthly mortgage repayments, leaving you with more disposable income.

For those whose mortgage deal is about to expire or first-time buyers, taking out a fixed-rate mortgage whilst the interest rate is low may save you money in the long run, as you can avoid the risk of rising rates.

It is always important for homeowners and first-time buyers to weigh up their options to allow them to make the best decision regarding their mortgage.

If you are a homeowner or home buyer, our mortgage advisors here at Mortgage Solutions Belfast can help you find the most affordable mortgage deals.

Use our mortgage calculator to help calculate what your repayments could be if mortgage interest rates fall.

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