The Bank of England (BoE) has decided to cut interest rates by a whopping 1.5%, down to 3%, the lowest rates have been since 1955.
Great news if you’re on a tracker mortgage, as your payments should be dropping. We’ll have to see if other areas of borrowing also fall. Not so good news if you’re looking to save though, as savings rates will probably come down too.
Although a cut was largely expected, I’m not sure too many people predicted a 1.5% fall – it’s the biggest single cut since 1981, when rates came down by 2%.
There’s plenty more information available on the rate cut at the BBC.
Let us know your thoughts on this news in the comments below – will you be better off each month?
Well the last week has seen several interesting developments in the mortgage world.
Firstly, the Bank of England has slashed the base rate by 1.5%, meaning the base rate is now only 3%.
This should be particularly beneficial for anyone currently on a tracker but is unlikely to have a direct effect on new rates. However many lenders have passed on this cut in the form of a reduction in their Standard Variable Rates.
Secondly, as a result of the base rate cut, the 3 month LIBOR rate has been cut by 1%, now sitting at just below 4.5%.
The LIBOR rate is the rate at which banks lend to each other and will have a direct effect on the costs to the banks of obtaining funds, and therefore enable them to reduce mortgage rates.
As a result of the above, nearly all tracker rates have been withdrawn from the market to be repriced. The next week or so should be interesting as new rates gradually begin to appear again.
But what does this mean to the individual who may be about to remortgage?
Well, two things.
Firstly, the rate that you will revert to when your current deal comes to an end, the lenders Standard Variable Rate(SVR,)will probably be much lower that it would have been a week ago. This may mean that you are better off sitting on the SVR with your current lender rather than moving elsewhere or taking another deal with them.
Secondly, we are due to see a lot of new rates coming out which may well be a lot more competitive than you were expecting. So there could be cheaper options out there.
Also, depending on how rates are repriced, it may be a good time to fix your mortgage rate, although this will depend on your circumstances.
If you are due to come out of your current deal any time soon, speak to an independent Mortgage broker. They will be able to tell you what the best deals out there are for your circumstances and tell you whether it is worth you moving at all or, as is now often the case, you are better off staying where you are.