In the first emergency interest rate cut since 2008 and just ahead of today's Budget, the Bank of England has announced that the current base interest rate of 0.74 per cent will be reduced to 0.25 per cent, in a bid to stall the economic impact of Coronavirus on the UK economy.
What repercussions does the announcement have for current and prospective mortgage borrowers? Can you expect a reduction in mortgage payments, and what other effects of the interest rate cut do you need to be aware of?
The Bank of England's move is primarily to soften the blow on the economy of the Coronavirus outbreak. Small and medium-sized businesses are particularly at risk from the potential impact, and reducing the interest rate further is part of a solution package designed to make borrowing easier for businesses.
It is to be expected that some mortgage lenders will slash mortgage rates even lower than the already historically low rates currently available. However, smaller lenders will need to weigh the decision against the potentially detrimental effects of an ever-smaller profit margin. Therefore, in reality, the number of people whose mortgage repayments will become smaller will be limited.
Having said that, the most important takeaway from the current Bank of England move is that it should help smaller companies ride out the storm of the Coronavirus outbreak, which will help protect jobs – a far more important consideration for mortgage payers.
If you don't yet have a mortgage, now is a good time to look into one, however. We now know for certain interest rates won't be rising any time soon, so you can compare mortgages knowing that mortgage rates will remain low for the foreseeable future. Find out how much you could borrow using Habito (opens in new tab)'s online comparison tool below.