The base rate cut has had an understandably swift impact on variable mortgage rates, with our latest figures showing that the average plummeted to a fresh low just weeks after the announcement was made. But is everything as it seems? Closer analysis suggests that this hides greater variation behind the scenes, with movement not being quite so clear-cut.
Base rate reductions?
The figures, taken from the latest Moneyfacts UK Mortgage Trends report, show that the average two-year tracker mortgage rate has fallen by a significant 0.19% in the last month, standing at 1.94% in August (down from 2.13% in July). Not only is this the lowest ever recorded, but it implies that almost the full 0.25% base rate cut has been passed on.
However, this may not necessarily be the case. Looking closer at the figures suggests that the base rate cut may have been pre-empted, since in July the average tracker rate actually rose by 0.12% to 2.13%. This means that the rate has only fallen by 0.07% over the last two months, so in real terms, the base rate-linked reduction is far less than it first appears.
This trend is apparent across the variable rate sector: all loan-to-value (LTV) tiers except the 95% saw rate increases in July, so despite the fact that they all saw reductions in the last month, it wasn't enough to surpass the previous increases by any extent. Essentially, this means that the overall reductions are ultimately not as high as they may have been had the rates not risen in the month before.
This isn't confined to the variable sector, with the fixed sector similarly not feeling the full effects of the base rate cut. Nonetheless, the month-on-month fall of 0.04% means that the average two-year mortgage rate has hit yet another record low of 2.44%, while the average five-year fixed rate has seen a similar reduction of 0.03% to another record of 3.05%.
So, borrowers may not be feeling the full impact of the base rate cut, but they're certainly still benefiting – mortgage rates are now among the lowest ever recorded, so if you're thinking of taking the plunge, now's a great time to do so! Check out the top mortgage rates to see if you can take advantage.
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