As we step into 2025, the UK economy is navigating a challenging landscape. From rising government borrowing costs to persistent inflation and a depreciating pound, the financial environment is shifting rapidly. For those planning to secure a mortgage in the next six months, acting now could be a smart financial decision—here’s why.
- Rising Borrowing Costs: UK government borrowing costs have surged, with 10-year gilt yields reaching 4.82%, the highest since 2008. This reflects investor concerns about fiscal sustainability and inflation, which could lead to higher mortgage rates.
- Currency Depreciation: The pound has fallen to its lowest level against the US dollar since late 2023, trading just under $1.23. This adds pressure on import costs and could influence inflation further.
- Retail and Consumer Trends: Major retailers like Tesco and Marks & Spencer have flagged concerns about slow sales growth and rising costs, indicating broader economic pressures that could impact household finances.
- Bank of England Base Rate Review: The Bank of England’s next base rate review is set for February 6th, 2025. While some anticipated rate cuts, persistent inflation may delay these, potentially leading to higher borrowing costs.
- Fiscal Policy Adjustments: The government may need to implement tax hikes or spending cuts to stabilize public finances, which could indirectly affect mortgage affordability.
- Lock in a Rate: With uncertainty surrounding the Bank of England’s decisions, securing a mortgage rate now can shield you from potential increases. Fixed-rate mortgages offer predictability in uncertain times.
- Inflation Impact: Rising inflation erodes purchasing power, making it more expensive to delay big financial decisions like buying a home.
- Market Trends: Mortgage lenders may adjust their offerings in response to economic pressures, potentially tightening lending criteria or increasing rates.
- Speak to a Mortgage Advisor: A professional can guide you on the best rates and products available in the current market.
- Review Your Finances: Ensure your credit score is in good shape and that you have a clear understanding of your budget.
- Act Before February 6th: If you’re in the market for a mortgage, acting before the next Bank of England base rate review could save you money.
The UK economy’s challenges underline the importance of proactive financial planning. For those considering a mortgage, the time to act is now. By securing a rate and locking in predictability, you can navigate these uncertain times with greater confidence.
