According to experts, the monthly mortgage payments of around five million borrowers would be reduced by a cut in Bank of England base rate.
A reduction in the base rate would also encourage greater competition between lenders offering fixed rate deals. The Monetary Policy Committee of the Bank of England is expected to reduce its borrowing expenditure by 25 points in the near future, although a number of experts believe that a cut may not happen until later in the year.
Around half of the 11 million borrowers in the UK have a fixed rate mortgage, while the remainder are either on the Standard Variable Rate, discounted variable rates or a tracker mortgage. The Council of Mortgage Lenders have stated that variable rate products account for £611 billion. The number of borrowers who have a tracker mortgage is 1.5 million. However, a base rate cut may not immediately impact on borrowers’ monthly mortgage payments, as lenders look at a number of factors before cutting rates.
Although a rate cut will benefit a lot of home owners, experts warn the amount may not be that impressive. However, fixed rate deals will continue to be competitive, with lenders releasing products with some of the lowest rates ever seen. The cut may not be good news for everyone, as interest rates for savers continue to be at their lowest, with annuities and gilts falling in value.
Mortgage advisers are CeMAP trained so that they can advise people looking for a new mortgage or to swap to a better deal.