Bank of England Makes Second Cut to Interest Rates in Eight Days

The spread of the coronavirus throughout the UK has led the Bank of England to make a second reduction in interest rates in a little over a week. On 19th March, the base rate of 0.25% (reduced from 0.75% on 11th March) was reduced further to just 0.1%. They have never reached a lower level. “This rate cut only affects existing borrowers on base rate linked tracker mortgages,” said Darren Pescod, CEO of The Mortgage Broker Limited. “We are not expecting lenders to lower their standard variable rates or their fixed rate deals.” Let’s crunch some numbers. Someone has an existing £100,000 repayment mortgage based on a 25-year term with a two-year tracker deal in place. The deal is set at 0.89% above the bank base rate. This would have given a payrate of 1.14% (0.89% plus 0.25% base rate). The mortgage holder would be paying £383 per month in this instance. The reduction to the Bank of England base rate would take the new tracker mortgage rate to 0.99%, reduced from the previous 1.14% (0.89% plus 0.1% base rate). This means the monthly mortgage payment would decrease to £376 per month. It’s not a huge decrease, but in uncertain times, anything helps. “It wouldn’t surprise me if lenders increase their margin on base rate tracker mortgages to new clients,” Darren added following the rate cut. “We’ve already seen some high street lenders withdraw their current tracker rates – the ones that are available to new clients.” We’ll keep you up to date on any further changes from the Bank of England or the government that could influence the mortgage market. The mortgage was a complex case and Anthony was so helpful during the process. I probably would have given up if it wasn’t for his help. Anthony… Sev Menderes A brilliant service. As first time buyers Suzy and Jordan were on hand to answer a number of questions and their advice was massively appreciated.… Joe Fantastic professional service. Kristy