The Base rate cut, what does it mean for you?

Base rate cut

Last week’s unanimous decision by the Bank of England (BoE) Monetary Policy Committee to reduce the base rate by 0.25% was the first time we have seen the rate change since 2009.  The move is designed to add extra stimulus to the UK economy whilst it adjusts to the prospect of a future outside the European Union.

The cut in the Bank Rate should lower borrowing costs for households and businesses.  However, as interest rates are close to zero, the BoE has suggested it may be difficult for some banks and building societies to reduce deposit rates much further which, in turn, might limit their ability to cut their lending rates.  That’s why there are a number of additional measures being put in place to help this rate cut get passed on to those already borrowing money or looking to fund future purchases.

So what does it mean for you and your mortgage?

Well, if you are currently on a ‘Tracker’ mortgage which follows the Bank of England Base Rate, you’ll see a fall in your mortgage payment which will most likely be reflected in your September payment or earlier, depending on your direct debit date.  For those on a ‘Fixed’ rate, you won’t see an impact on your monthly payment until you come to the end of the introductory rate, and then your payments will depend on the rate you move to, whether your lender has decided to pass on the rate cut, and that the BoE Base Rate remains at its current record low level.

People on a ‘Standard Variable Rate’ (SVR) will need to look out for news from their lender on whether they will see the rate come down.  Remember a base rate cut does not automatically mean that the lender will give you a reduction in your monthly payment.  Since the lending crisis of 2009, many lenders have removed the link between their SVR and the bank base rate, and now use a separate internal index to set their rates.

If you are on your lender’s SVR, there has never been a better time to have a look at your mortgage payments and see how much money you are losing each month by not reviewing how much you pay against the rates available in the mortgage market today.  It doesn’t take long to see if you can remortgage to a more competitive deal and, with a little help from us, you can start to see your monthly payments reduce, giving you the full benefit of today’s current record low interest rates.

You can contact us at any time if you have any questions on the base rate change, or if you would like an informal conversation about how you can take advantage of the low interest rates available at the moment. We look forward to hearing from you soon.  Remember: if you are on an SVR, chances are you can save money each month and if you are coming to the end of a fixed rate deal then don’t let inactivity push your payments up.


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