The first Bank of England base rate drop since 2020 has been eagerly anticipated, and the move down to 5% earlier this month could give the economy a welcome boost over the coming months.
The Bank of England’s governor said a decision to cut interest rates is “an important moment in time” but warned people not to expect a sharp fall in the coming months.
The price of mortgages is dictated by a number of factors but the expected reduction in base rate has been on the cards for a while and as a lender we’ve already made a number of cuts to fixed rate mortgages recently.
This will come as good news for borrowers.
It’s a sign that stability in the economy may be returning which should have a positive impact on the mortgage market over the coming months.
There have been significant falls in the cost of mortgages since the peaks seen following the 2022 mini-Budget and things continue to improve.
In fact, the average borrower could be paying £129.72 less per month versus the day before the bank base rate increase to 5.25% 12 months ago.
At the time our lowest available residential fixed rate was a 5-year at 5.90%, with an average monthly payment of £1,135.67.
Today, the equivalent product is sub 4.50% with a monthly payment of about £1,000.
Despite the good news that a reduction in rates brings, so called ‘mortgage shock’ is still a very real concern for many households.
More than three million, or 35% of mortgage accounts, are still paying rates of less than 3% – the majority of whom will have their fixed rate expire before the end of 2026.
A bank rate reduction will be welcome news to those who will need to fix their mortgage rate soon and means that across the mortgage industry we can offer better news for households coming off a lower rate.
It’s expected that throughout the remainder of the year mortgage lenders and intermediaries will all be busy, working hard to secure the best products for applicants.
So the service and efficiency that the technology and systems we use plays a vitally important role in helping to support more buyers onto and up the property ladder.
As competition hots up in the mortgage market, a focus on simplifying steps for customers and brokers is essential for all lenders.
Being consistent and reliable in a rate-cutting environment is crucially important when efficiency is front of mind.
First-time buyers and those coming to the end of their current mortgage term need to feel safe in the knowledge that they are getting the best product to suit their needs and that their lender is responding quickly to lock in the best option for them.
And for mortgage brokers, efficient systems allow them to deliver more business and better results for their clients.
Investing in technology and service is crucially important as we face into some busy months ahead, and the changes we have made to our systems this year mean that brokers can now transfer customers onto a new product using Mortgage Hub – and with instant illustrations and, in some cases, immediate offers, case tracking, and document upload functionality, managing rate switches has never been easier for our partners.
To ensure we’re supporting each other as we head into a busy period, we’ve put a number of measures in place to support our partners.
In many instances, brokers can contact us using webchat to resolve cases quickly, and use our self-serve portal to help answer post application questions.
Our network of business development managers (BDMs) work hard to regularly check in with our broker partners across the UK, and recognise the value of having great relationships.
They can share information on products and rates, technology upgrades and market information, as well as sharing more detailed information on packaging requirements and tips to speed up processes.
Working smarter, not harder is essential as we’re all getting busier, and utilising the tools available across the industry can help drive efficiencies and allow us to work together to deliver better outcomes for borrowers.
Martese Carton is director of mortgage distribution is Leeds Building Society
