Martin Lewis has highlighted how waiting for the Bank of England’s base rates to fall could actually leave eager house buyers worse off.
Speaking with Coreco mortgage expert Andrew Montlake on The Martin Lewis Podcast, the MSE founder answered a fan question with some harsh truths.
The caller explained that their mortgage was due to renew in January and questioned if they should go onto a standard variable product, which fluctuates with the Bank of England’s base rate, or a short-term fix until the “interest rates drop”.
Martin and Andrew both agreed that the standard variable rate was currently the worst possible option, with the mortgage expert highlighting some products “are even up at 9.5%”.
Andrew recommended a tracker product instead, currently on offer at around 5%. However, Martin shared some harsh warnings.
The money mogul admitted that he was vaguely assuming the caller’s age as he said: “I get this often from people under 35, people say: ‘When rates go back down to what they should be’. That’s the type of phrasing I get.”
He explained that these are the people who grew up with base rates of around 1% between 2008 and 2022 compared to the current 5%, but Martin warned: “There is no ‘when they go back down’. If you take a historical look at about 300 years of interest rates, the period that was the anomaly was 2008-2022.
“The idea that it must go back down to where it was is not something you should be basing your thinking on. I’m not saying it won’t go back down to that level, I’m saying there’s no rule that it must go back down to that level because it was an anomaly.
“By going onto a variable rate and paying more, you’re paying more for an unpredictable potential gain. From my perspective, it’s the riskier option.”
Andrew shared his expert opinion from the industry side: “There is some expectation that we could see a Bank of England base rate of 3.5% or 3% next year but that can change so quickly – we’ve seen that in the past.”
Martin also highlighted that long-term mortgage products are based on long-term predictions, meaning this low could actually bring higher interest rates depending on the fluctuations.
