The Bank of England’s Monetary Policy Committee (MPC) reduce the base rate
The Bank of England’s MPC cut the base rate by half a percentage point to 0.25% on the 11th March, the steepest rate cut since the 2008 financial crisis. On the 19th March the base rate was cut further to 0.1%. After two years at 0.75%, the rate is now back to an historic low.
The MPC said the emergency cut, was to counter the effect of the coronavirus outbreak on the economy. The Bank of England said: their role was "to help UK businesses and households manage through an economic shock that could prove sharp and large, but which should be temporary.”
How does the rate cut affect your mortgage?
Any mortgage borrowers who have a tracker rate mortgage or have a variable rate mortgage will see an immediate reduction on their monthly borrowing costs.
However, customers with a fixed rate mortgage will see no change to their fixed rate costs until they come to re-mortgage, assuming the base rate remains the same.
As most buy-to-let investors take out interest only mortgages many landlords could also see savings to their mortgage payments.
Banks including NatWest, Royal Bank of Scotland and Lloyds Bank have already announced they will offer mortgage customers who are affected by the coronavirus a repayment holiday if they are unable to work.
‘Given the bank rate reduction we may see mortgage lenders reduce their mortgage rates on some products during the next few months. This may reduce the 10-year fixed rate mortgages, but as the rates were at historic lows anyway it is unlikely that those rates will fall much further. The cut in base rates will be particularly disappointing for savers, especially first-time buyers or anyone else who is saving up a deposit for a new home. We recommend that if you are looking to move to a new house, you contact us early so we can review the mortgage market and find the most appropriate mortgage product for your financial circumstances. If you do this before you start looking for a new home, we can tell you exactly how much you can borrow so you know your price range.’
'If your mortgage is coming up for renewal in the next six months please call us so we can review the mortgage market and find the most appropriate mortgage product and mortgage rate for your financial circumstances. Remember at Lonsdale Mortgages we do not typically charge a fee for our services, we receive commission from the provider except in instances where we organise additional borrowing for a client with their existing lender, as some providers do not offer commission. At Lonsdale Mortgages our mortgage brokers can save you time and money. We can manage your mortgage application and liaise with your mortgage lender on your behalf. We also liaise with your solicitor, so you get your mortgage completed as quickly as possible. If you would like to review your mortgage options and require a free mortgage advice consultation, please call our St Albans mortgage broking team on 01727 845500.’
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.