Ready for your latest instalment of fantastic news in the mortgage market? The Bank of England has just cut interest rates from 4.5% to 4.25%, the fourth reduction in this cycle. This latest 0.25% drop adds to the growing list of positives energising the property market right now.
Expert Insight
Richard Merrett, Managing Director of Foxtons partner mortgage broker, Alexander Hall, shares some insight on what might change with these new rates:
...benefitting a wider range of borrowers, not just those with larger deposits...
"Today's news is set to further boost confidence in an already positive market. Rates have fallen across all loan-to-values for both residential and buy-to-let fixed rates in the last month. Notably, sub-4% rates are back, with a 2-year 75% LTV rate falling below this threshold for the first time since September 2022, benefiting a wider range of borrowers, not just those with larger deposits or equity in their homes.
Additionally, for those with lower deposits the availability of 5% and 10% deposit mortgages is at a 17-year high, potentially allowing first-time buyers to purchase homes sooner."
Richard Merrett
Managing Director, Alexander Hall
What this means for buyers and buy-to-let landlords
If you have a tracker mortgage linked to the Bank of England's rate, you'll see an immediate drop in your monthly payments.
For the majority on fixed-rate deals, while your current payments won't change, this cut might mean better rates when you come to remortgage.
Most excitingly, if you're looking to get a new mortgage, this is brilliant timing for you. The base rate influences the interest rates lenders attach to the mortgages they offer, and if interest rates go down, even as little as 0.25%, you’re in for big savings on your monthly payments:
See How Much You Could Save Monthly Based on a 30-year repayment mortgage termThe Impact of a 0.25% Rate Drop
More reasons to get moving
Read The rise of low-deposit mortgages: opportunities at a 17-year high
Lenders aren't waiting around – they've already started reducing rates on new fixed deals in anticipation of further rate cuts. Here's what's happening:
• Rates dropping across the board: Both residential and buy-to-let fixed rates have fallen across all loan-to-value options in the past month.
• Interest rates below 4%: For the first time since September 2022, you can get a 2-year 75% LTV mortgage below 4%.
• Low-deposit mortgages available: There are more 5% and 10% deposit mortgages available than at any point in the last 17 years – perfect if you're eager to get on the property ladder.
Improved affordability – the real game changer
The affordability test is often the biggest hurdle when applying for a mortgage. Lenders need to check you could still afford repayments if rates were to rise. When the tests ease, the maximum lending amounts increase, meaning you’ve got more to work with when you’re searching for your next home.
• Five of the UK's top lenders have improved their affordability calculations
• Higher loan-to-income ratios are now available from some of Alexander Hall’s intermediary-only lenders, which gives you more borrowing power
This means more options for first-time buyers and current homeowners looking to move up the ladder.
What to do next
There are two simple ways to get started:
1. Chat with a mortgage expert: Speak with an Alexander Hall specialist today for free expert guidance and access to the most competitive rates on the market.
2. Find your next property: Sign up to My Foxtons to tell us what you're looking for – we'll let you know the moment we find it. And if you're selling too, book a valuation to see what your current property could achieve in today's energised market.
Source: This article has been reviewed and edited by Foxtons Sales department and Alexander Hall mortgage advisers. The information has all been carefully reviewed to ensure you have the most reliable insight on a complex market, exactly when you need it. If you have any questions about the article, ask a Foxtons expert.
