Published: 20/03/2020Even in these times of uncertainty, an interest rate at it’s lowest ever level can only be a good thing for the housing market. Read on to find out more about the options available.
The Bank of England has slashed the base rate for the second time in just over a week, reducing it from 0.25% to 0.1%, pushing it to its lowest level in history.
The base rate is the Bank of England's official borrowing rate – i.e., what it charges other banks and lenders when they borrow money – and it influences what borrowers pay on their mortgages and other debt.
The surprise decision was taken at a special meeting of the Bank's Monetary Policy Committee on Thursday 19 March, just days after it was cut from 0.75% to 0.25%.
Here are some of the need-to-knows in regards to mortgages:
Some mortgages will get even cheaper, but it depends on the type of mortgage you have.
Existing tracker mortgages, whose rates 'track' the base rate – should see their rates drop even further.
Mortgage costs should drop by an average £10/month on a typical £150,000 mortgage – on top of the £35-£40/mth drop from the latest base rate cut.
If you are applying for a new tracker mortgage, act now (dated 20.03.2020) to make the most of existing tracker mortgage deals on the market. Nationwide Building Society have already pulled their current tracker mortgage range for new customers and are likely to replace with a new range of products that track at a higher level above the new lower base rate, that won’t then fully benefit from the base rate reduction.
Our mortgage advice partners, Broadland Consultants, can quickly check which lenders still offer historically low tracker mortgage deals for you, and help you get a tracker mortgage arranged and save you time and money.
Fixed Rate Mortgages
If you have an existing fixed rate mortgage it won't change. Fixes are fixed, though it may be worth you paying your current lenders Early Repayment Charge to move to a new lower fixed rate mortgage and save money moving to a new fixed rate mortgage deal.
If you are in the market for a new fixed rate mortgage, in the next few days lenders fixed rate products may end up being even cheaper now the base rate has dropped.
Our mortgage advice partners, Broadland Consultants can quickly check to see if it’s worth you paying the fees to leave your existing fixed rate mortgage product and help you save money by moving to a new lower fixed rate mortgage.
If you need a new fixed rate mortgage, they can also help here to. Broadland Consultants can quickly search the market for you, and help you setup the best fixed rate mortgage deal while rates are so low. Act now to reserve your fixed rate mortgage, as rates won’t stay this low forever.
Standard Variable Rate Mortgages
And finally if you have a standard variable rate (SVR) mortgage you should hopefully see a reduction at the discretion of the lender as not all lenders track what the Bank of England does.
You'll usually be on an SVR after your fix or tracker ends.
A 'discount' variable mortgage follows the lenders SVR at a set rate, e.g., if the SVR is 4% and the rate is SVR minus one percentage point, it's 3%.
SVRs are pricey, so if you're on one, don't automatically stick with it even if your rate is cut.
A tiny number won't see rates drop where their SVR deal has what's called a 'collar', which prevents rates falling below a certain level. You should be contacted by your lender if you're impacted.
So I'm looking for a mortgage – what should I do?
Whatever the impact, if you need a new mortgage or your existing deal is coming to the end of your fix or tracker, it’s time to pounce on a new deal.
Even if it’s six months ahead, Broadland Consultants mortgage advisers can help you get the mortgage arranged, and fully approved so it’s ready to start in 6 months’ time for you.
Our message for months has been that mortgage rates are already incredibly low, so if you're looking for a deal and you qualify for one, why wait? The base rate going down only further enforces that message, make use and take advantage of these historically low mortgage rates.