For the first time since 2009 the Monetary Policy Committee at the Bank of England has taken the decision to cut the base rate to a record low of 0.25%. There has been a great deal of speculation since the EU referendum back in June as to whether this may happen. The general consensus has always been that it was more a matter of ‘when’ rather than ‘if’ the base rate would be cut. Not only has the base rate been cut, but additional quantitative easing measures have been announced meaning that more money should be available to banks to lend.
So what will this mean for your mortgage?
Fixed Rate Mortgages: If you currently have a fixed rate mortgage, the change in the base rate will not have any impact on your mortgage rate or payment. You could consider changing to another rate now, however if you are still in your fixed rate term you will more than likely be liable to pay an early repayment charge. Depending on the size of your mortgage and any early repayment charges, you may well end up worse off by switching now rather than waiting until the end of your current deal.
Standard Variable Rate Mortgages: If you are on your lender’s standard variable rate (SVR) you may see your mortgage rate and payment drop in the coming weeks or months. Unlike a tracker mortgage though, your lender is not required to change their SVR as a result of the change in the base rate. As such the reality is that in the majority of cases you are unlikely to benefit from the base rate cut, and should probably consider your options as per our blog post of 15th July. It would be wise to review your current deal and talk to us regarding taking a fixed rate.
Bank of England Tracker Mortgages: In this situation you will probably see your mortgage rate and payment drop from next month. On the other hand some tracker mortgages have a ‘collar’; a minimum rate below which your mortgage can not go. With interest rates at 0.25% many people may already find themselves in a position where their rate is as low as it can go. In this situation it would be worth reviewing the terms of your current mortgage and discussing with us the possibly of transferring onto a fixed rate instead.
If you are currently in the process of applying for a mortgage, or would like to discuss the impact the change in the Bank of England base rate may have on you, please contact one of our team today on 01225 667177 or by emailing email@example.com. We can review your current arrangements to make sure that you are on the right mortgage deal for you and your circumstances without any charge or obligation on your part. We look forward to speaking with you.