A breakdown of the Spring Statement:
Chancellor Rachel Reeves has fulfilled her commitment to limit major fiscal events to one per year, scheduled for the Autumn. Consequently, the recent Spring Statement had minimal direct impact on the mortgage market.
In February, the Office for National Statistics (ONS) reported that the Consumer Price Index (CPI) rose by 2.8% over the previous 12 months, a decrease from 3.0% in January and slightly below the anticipated 2.9%.
Despite this decrease, the Office for Budget Responsibility (OBR) forecasts that inflation will average 3.2% throughout 2025, an upward revision from the 2.6% projected in October.
Further to this, however, it was announced that the OBR has forecast inflation to average at 2.1% in 2026 before hitting the government’s target of 2% in 2027.
On March 20, the Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to maintain the base interest rate at 4.5%. This decision reflects the Bank’s cautious approach amid ongoing economic uncertainties and inflationary pressures.
Historically, since the MPC’s establishment in 1997, there have been only three instances where the base rate was cut while core inflation exceeded 2%. This underscores the Bank’s typical strategy of holding or increasing rates during periods of elevated inflation.
These statistics may mean that the consensus prediction of several gradual reductions to base rate throughout the year may be incorrect.
During her speech, the Chancellor also touched on the fact that the government will be “within touching distance” of their house building targets, forecasting that 1.3 million additional homes will be built over the next 5 years. According to the OBR, this means that house building will reach a 40 year high.
What does this mean for our clients?
Directly, the spring statement will have very little immediate impact on clients. Time will tell whether any wider comment today will have a more indirect impact on the mortgage market over the coming months. Crucially, if your mortgage is due for renewal in 2025, Cooper Associates Mortgages can help you to secure the best rate for your circumstances now, monitor any changes to rates, and swap you to a better rate should one become available to you.
Mortgage Market Update:
In March 2025, the Bank of England’s Monetary Policy committee voted 8-1 in favour of maintaining base rate at 4.5%. This decision follows a 25 base point reduction in February 2025, and reflects the Bank’s ongoing efforts to balance controlling inflation with stimulating economic growth.
The average mortgage rate for a 2-year product at a 60% loan-to-value (LTV) is currently 4.24%, with the 5-year equivalent standing at 4.20%.
At 95% loan-to-value, average 2-year fixed rates are currently 5.67%, with the 5-year fixed rate at 5.37%.
Despite the recent stability of the base rate, the mortgage market has seen rates fluctuate throughout the year as the market reacts to new economic data and changes to policy. General speculation favours further interest rate reductions throughout the year. However, mortgage rates are set based on both current and forecasted market conditions, and the uncertainty around inflation and economic growth are likely to impact rate setters’ upcoming decisions.
