February 6th, 2025
Just one month into the new year and we have some big news in the UK mortgage market.
The Bank of England has officially reduced the base interest rate from 4.75% to 4.5%, following the Monetery Policy Comittee’s (MPC’s) first meeting of 2025.
Here’s what this means for you as a self-employed professional or contractor.
How Will the Base Rate Cut Affect Mortgage Rates?
Whilst the base rate isn’t the sole dictator of whether mortgage rates are high or not, it can directly influence borrowing costs across the market. Mortgage lenders typically adjust their products in response to changes in the BofE base rate, which can impact both first-time and existing borrowers.
Here’s How:
- Lower Monthly Payments for Certain Mortgage Types
If you are on a tracker mortgage, which directly follows the base rate, you could see a reduction in your monthly payment. Lenders usually adjust their rates in response to base rate cuts, meaning you might benefit from immediate savings on your mortgage repayments.
If you’re self-employed, you may rely on fluctuating income streams, and so lower monthly payments could help with financial flexibility.
- Better Deals for First-Time Buyers?
This reduction is likely to encourage lenders to introduce more competitive mortgage products. The reduction in base rate, coupled with the changes to stamp duty coming in April could influence a surge in property purchases from first-time buyers. Therefore, lenders may be inclined to offer more competitive products to stand out amongst a potentially busy period in the housing market.
- But What About Fixed Rates?
If you are currently on a fixed-rate mortgage, your payments will remain unchanged until your term ends, but now may be the right time to explore remortgaging options if you are towards the end of your deal.
The drop in base rate may influence lenders to lower rates on new fixed-term products, and so you may be able to secure a lower rate if you’re nearing the end of your current term.
I’m Self-Employed – What Do I Do Next?
It’s no secret that securing a mortgage when you’re a freelancer requires strategic planning, due to sporadic income streams and a different perception of you as a borrower in the eyes of some lenders.
As always, planning ahead and making the right provisions is a must.
If you wish to act on this updated base rate figure, your property goals will be reliant on a strong credit history, up-to-date financial records and in some cases, a solid deposit at the ready.
Many lenders now offer products that cater directly to non-traditional workers, but nevertheless, these things are crucial in being able to secure the best possible deal.
Depending on your circumstances, it could be an opportune time to remortgage. A more favourable deal could be waiting for you.
If you’re unsure of the best route to take, we advise speaking to a member of our expert mortgage team to see what is available to you.
Book in here to speak with one of our brokers, and see how we can help with your property aspirations.