Interest Rate Cut Is A Double-Edged Sword

God save the Queen

Whenever there is a cut in interest rates, we often start talking about how homeowners will benefit with reduced mortgage repayments. Of course, things aren’t as cut and dried as that – there are both winners and losers. And many of us will fall into both camps.

Around 50% of homeowners are on fixed rate mortgages, which won’t go down, whilst around 10% are on variable rates, which may or may not go down, depending on how the lender feels. The remaining 40% are on trackers which should in theory go down and reduce their payments, unless they’ve reached the minimum interest rate often set by lenders on these products. 

Some lucky homeowners will own their houses outright, so again they won’t benefit. 

And in fact, in all of these cases, there will be people with savings (yes, they do still exist), they’ll probably start to lose out as banks and building societies cut their savings rates. 

So whilst on the surface today’s huge interest rate cut might look good for homeowners, there really are two sides to this coin.

Creative Commons License photo credit: BraNewbs

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