The major lender didn’t waste any time in making a change
Questions have been looming for weeks about the potential for a Bank of England base rate cut and the possible impact on the UK mortgage market.
On Thursday, we got our answer as the Monetary Policy Committee took the decision to decrease the main rate from 5.25% to 5.0%. The reaction across sections of the market was instant.
Santander UK was among the first to act. Within minutes of the BOE’s decision being made official, the lender issued a Press release announcing a host of changes across both its savings and mortgages arms.
Of note, it stated that all Santander tracker mortgage products linked to the base rate would see a decrease of 0.25% beginning on September 3. That included the Santander follow-on rate, which is set to fall to 8.25%. In addition, the lender’s standard variable rate will also fall in line with the BoE – dropping by 0.25% to 7.25% beginning on the same date.
It could be argued, however, that Santander wasn’t the first out of the gate – with several lenders actually announcing rate moves immediately before the Bank of England’s decision. Both Keystone Property Finance and MPowered Mortgages declared rate changes hours ahead of the central bank’s move as they attempted to provide “good news” ahead of what was expected to be a “knife-edge decision”.
The question now for brokers, is how quickly other lenders will react and what the market reaction to these moves will be. Will borrowers react immediately and look to seize on the change? Or will they hang-fire believing further rate moves are in the near future?
Jonathan Moyes, head of investment research at Wealth Club, suggested it might be the start of a “brave new world”, albeit one in which banks will need to remain cautious.
“Whisper it quietly, but an economic revival appears to be gathering pace,” he said. “Recent survey data suggests the UK’s services and manufacturing sectors are performing strongly, unemployment remains low, house prices have resumed their upward trend, and the country is in a rare state of political stability. With the UK on such a positive path, the interest rate cut will add further fuel to the UK’s recovery, but this does pose questions over whether the bank risks unnecessarily stoking inflation. By the Bank’s own forecast, inflation is set to rise to 2.75% in the second half of 2024.
“Looking ahead, the Bank of England remains damned if it does, and damned if it doesn’t. All eyes will now be on Sterling, with the Federal Reserve choosing to keep rates on hold yesterday, Sterling has weakened in the minutes following the announcement. Too much of this, and the Bank may regret its newfound assertiveness.”
