Bank of England Base Rate Decision Commentary – CUT!

The Bank of England have made the landmark decision to CUT Bank Base Rate to a new historical low of just 0.25%.

This change has been expected by many for some time now and marks a statement of intent from the Bank after comments from Mark Carney, the Bank of England Governor, who is determined to try to stave off the threat of a slowing economy and give it a boost.

This decision is coupled with more Quantitative Easing, (QE) to the tune of £60 Billion.

Andrew Montlake, Director at Coreco Mortgage Brokers comments, “In cutting the Bank Base rate to a new historical low, the Governor has at least delivered on his pledge to help try to boost an ailing, post-Brexit economy. There is a risk however, that he has acted too early, potentially diluting a more powerful weapon to use in the future should the need arise.

“The immediate benefit of a cut will be felt by those mortgage borrowers with a tracker product who, for a 0.25% cut, should see their monthly payments reduce by approximately £24.16 on a mortgage of £200,000 over an average 25-year repayment mortgage or £41.66 if interest only.

“However, it is not a foregone conclusion that your mortgage will fall all the way down as some lenders have a “collar” or floor below which they will not reduce rates further. Some other lenders use their own version of Bank Base Rate which, although it always has historically, does not have to mirror the Bank of England. Borrowers should therefore check the small print of their mortgage product carefully.

“Similarly lenders may not rush to reduce their Standard Variable Rates as many will be keen to protect their margins and ensure they remain profitable.

“As far as fixed rates are concerned, Swap Rates have fallen dramatically since the Brexit vote so have to some extent already priced in a cut such as this.

” Although we do seem to be getting towards a point where lenders will be loath to cut any further, competitive pressure remains strong and should ensure the current crop of low rates continue for the foreseeable future, with the potential of even lower offerings over the coming weeks.

“It would therefore make sense for borrowers to take professional advice as reviewing their options now could amount to a significant saving in their monthly mortgage payments and there has scarcely been a better time to lock in to the relative safety of a longer term fix for those that need additional security.

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