Bank of England Base Rate held at 5% - money experts explain what that means for the mortgage market

The Bank of England has announced it will be keeping the base rate unchanged at 5%, following a 0.25 percentage point cut last month. The news on Thursday (September 19) was not unexpected among economists who predicted rates would be held.

Online mortgage broker Mojo Mortgages has conducted a thorough analysis of internal data and consulted with their in-house experts to provide clarity on what this means for mortgage borrowers. Mortgage rates have been edging down in recent weeks, but those remortgaging on to a new deal could still face big repayment jumps, at a time when other bills have already surged.

Jonn Fraser-Tucker, Head of Mortgages at online mortgage broker Mojo Mortgages, shares his expert analysis of the implications for mortgage borrowers. He said: "The Bank of England's decision to hold the base rate at 5.0% is unsurprising as economists have stated that we're more likely to see a potential rate cut in November.”

Fixed-rate mortgages have been steadily declining recently, reaching their lowest levels in two years. Last month, following the previous base rate reduction, the average fixed rate was 4.8%, down from 5.9% in August 2023.

“The decision to hold the base rate won’t overshadow the positive developments currently benefiting mortgage borrowers,” John said. “Fixed-rate mortgages have been steadily declining, reaching their lowest levels in two years.

“Last month, after the last base rate reduction, the average fixed rate was 4.8%, down from 5.9% in August 2023. This downward trend makes it an opportune time for borrowers to consider switching their mortgages rather than staying on their current deal, should they be able to.”

There has also been a notable increase in remortgage activity, with 47% of Mojo Mortgages' remortgage customers switching lenders last month, up from 36% in July. John Said: “We’re seeing this attitude change reflected in remortgage activity, too. Last month, 47% of our remortgage customers switched lenders, up from 36% in July. This trend signals a shift in borrowers seeking better deals, a process which we as a free mortgage broker have been able to assist with.”

The current market seems to be presenting a favourable environment for first-time buyers too, with 51% of Mojo Mortgages' home buyer customers in August being first-time buyers. “For first-time buyers, the market is currently the best it’s been since the mini-budget of 2022,” John said.

“With the majority (51%) of our home buyer customers in August being first-time buyers, it’s clear that many are taking advantage of the current mortgage market after two years of hesitation. There’s a growing eagerness among these buyers to get ahead of the curve, particularly if the upcoming Autumn Budget provides further support for first-time buyers.

“Overall, the Bank of England’s decision to hold the base rate at 5.0% keeps the status quo in the mortgage market - it's a relatively good time to be applying for a mortgage, and with many still expecting a rate reduction at the next base rate announcement, we could see even more mortgage lenders reducing their rates in the future.”

Guy Gittins, Chief executive officer of estate agents, Foxtons Group, also has a positive outlook, despite today’s interest rate hold. He said: “The nation’s homebuyers will have understandably been hoping for a second consecutive rate reduction today, having already responded favourably to what was the first cut in four years at the start of August.

“Since then, we’ve seen an increase in buyers entering the market by way of strengthening mortgage approval numbers and they are doing so with far greater confidence, which is helping to cultivate a consistent level of upward house price growth.

“Whilst rates have been held today, this improving market momentum is only likely to strengthen further, as mortgage rates continue to trend downwards, putting the property market in very good stead for the remainder of the year.”

Echoing this sentiment was CEO of loan company, Octane Capital, Jonathan Samuels, who said: “The mortgage sector has been responding well to the market certainty that followed the Bank of England’s initial decision to hold rates at 5.25% and this market sentiment has only improved further following the base rate reduction seen at the start of last month.

As a result, we’re not only seeing the rates offered on many products reducing, but the range of products available is also growing, with this greater level of choice helping more buyers to enter the market. Today’s decision to hold interest rates at 5.00% is unlikely to dent this growing market positivity and we expect more buyers to be tempted back into the fold, while the overall health of the UK property market will continue to strengthen.”