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Category: base rate

2025 has begun with rising Swap Rates as Trump is set to retake his seat at the White House and inflation remains high. Rather than reduce mortgage rates, which lenders were hoping to do, tactics have been reversed.

For property investors looking to buy or remortgage in the next three to six months, or for anyone sitting on their reversion rate hoping mortgages would become cheaper in the New Year, be warned; the deals you can get right now could be set to be withdrawn at any moment, with more expensive replacements to come.

Impact of international politics

Foreign affairs continue to impact the UK economy, ongoing conflicts overseas have been added in the New Year with a change in US political office.

Joe Biden will soon have to hand the keys to the White House back to Donald Trump, whose inauguration is set for Monday 20th January. If his international trade policy promises are followed through, Trump will make some major waves across the US and global economies.

Trump plans to boost tariffs on imported foreign goods, with the goal of increasing home-grown productivity (and hitting back at US trading rivals). In practice, this will increase prices on all sorts of necessary goods.

With his recent lobbying for Donald Trump’s victory in the presidential election, Elon Musk has become an extremely influential figure in international politics. The world’s richest man has shown a disturbing obsession with UK politics, as well as other English speaking countries.

Musk has used his X (formerly Twitter) social media platform to promote far-right extremists, incite harassment of Labour politicians, and call for the imprisonment of Sir Keir Starmer. The Prime Minister has publicly struck back against Musk’s political agitation, prompting the Home Office’s Homeland Security group to monitor Musk’s online activities.

It was widely reported that Musk planned to donate £80.5 million to Nigel Farage’s Reform UK party, which is positioning itself as a credible threat to the two-party power structure in the UK. With many Tories defecting, Reform may also challenge the Conservative Party for the place of Labour’s main opposition.

However, with Musk’s unexpected endorsement of Tommy Robinson, a convicted far-right activist, to take Farage’s place as Reform leader, there are now doubts that this massive donation will take place. Nevertheless, Musk’s status as a political wildcard continues to cause fear and concern.

Inflation and Swap Rates

Inflation has been on the rise, with the Office for National Statistics (ONS) calculating that it rose to 2.6% from November 2023 to November 2024. 

Just this month, inflation came down by 0.1%. Not a huge decrease by any means, so inflation still remains higher than the Bank of England’s (BoE) target for this year.

BoE governor and MPC member Andrew Bailey voiced his desire to see inflation drop to the 2% target this year, and he’s confident that this will happen. However, Trump is heavily rocking the boat which is why money markets are so uncertain.

SONIA Swap Rates, a key indicator of future money markets, have also been climbing since the start of the year.

At the end of 2024, some lenders said that they would aggressively bring down their rates in January to stay competitive. However, with Swap Rates on the up, lenders have had to reverse their thinking and many have been quick to withdraw their product ranges and put rates up.

The Base Rate

Everything going on in the macro-economic environment, which has put the money markets into another state of turmoil, has led economists to predict that the Base Rate will be held again at the vote on 6th February 2025. 

If you’ve been waiting expecting the Base Rate to drop in the New Year and for mortgage rates to come down, reality has hit. 

Anyone buying or remortgaging property in the short term needs to grab remaining low rate deals to avoid the risk they are withdrawn and replaced with more expensive alternatives.

Contact our expert mortgage advisors immediately to investigate your options.