This was part of a package of measures being introduced to in a bid to steel the economy against the disorder being created by COVID-19.
If you are on a tracker mortgage you should soon see the rate reduction passed on to your mortgage repayments. Likewise, if you are on your lenders’ standard variable rate (SVR) it is likely you will be impacted by this latest cut as many providers will factor it into their own base rate.
However, it would appear the cut will only benefit a small proportion of borrowers.
According to financial trade body, UK Finance, just 11% of borrowers are on tracker mortgages. Meanwhile, 69% of those people with outstanding mortgages in December 2019 were on fixed-rates, and will not see any change as a result of the BoE rate cut.
Sam Harhat, head of financial services at Andrews Property Group, said: “The message the Bank of England wants to give consumers and businesses through Thursday’s historic action is simple, we’ve got your back.”
He added: “Through countless monetary and fiscal measures, the Bank of England and government are throwing the kitchen sink at the economy in an effort to bridge it across the peak phase of the pandemic.
“How the decisive action announced on Thursday will filter through into the activity of consumers and businesses is hard to predict but it is without doubt another unprecedented move.”
Remortgaging
It’s not all bad news if you are on a fixed rate, however. Firstly, all mortgage borrowers whose repayments may be impacted by coronavirus are being offered three-month ‘payment holidays’ to help bear the brunt of the financial storm caused by COVID-19.
You can read more about payment holidays and how they work here.
What’s more, if you are about to remortgage or are one of the 16% of borrowers currently sitting on your lenders’ standard variable rate (SVR) – often also known as a bank base rate – you could benefit by switching to some of the competitive rates available at the moment.
But, if you are planning to remortgage experts think you should do so quickly. Indeed, Andrew Montlake, managing director of mortgage broker Coreco, believes things could change rapidly.
“Lenders have their own issues to deal with as many of their staff are off or working from home so this is unlikely to translate into cheaper rates across the board,” he said.
“We are already seeing some lenders, especially more specialist mortgage providers, increase their rates to protect their positions.
“For anyone looking at remortgaging within the next six months, now is categorically the time to get on with it.”
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Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
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