The Bank of England base rate cut came out of the blue and is an indication of the growing concern over the impact coronavirus is going to have on our economy.

But what impact will it have on people who have a mortgage?

The Bank of England has cut the borrowing rate from 0.75% to 0.25%, a 0.5 percentage point cut, to try to stimulate the economy during what is expected to be a tough period for the country.

A cut to the base rate will also mean that some mortgage rates will fall – particularly tracker rates, which follow the Bank of England levels. Around 11% of mortgages are on tracker rates.

People who are on their lender’s standard variable rate (around 16% of mortgage holders), usually because they have come to the end of a fixed rate deal, may have to wait to see if their mortgage payments go down. Some lenders have already said they will pass on the 0.5% percentage point decrease whilst others are said to be still reviewing their rates. Lenders aren’t forced to reduce rates and mortgage interest rates are already extremely low.

If you are on your lender’s standard variable rate (SVR) it is worth remembering that this is still likely to be higher than other mortgage rates, even with a reduction following yesterday’s bank rate cut. If you are on the SVR it is worth looking around to see what better rates are available.

Most homeowners are on fixed-rate mortgages and won’t see any change in their rate because of the Bank of England move.

However, the interest rates of new fixed mortgages may come down soon, which will be good news for anyone about to take out a new mortgage and looking to fix the rate for, say, two, five or even 10 years.

For a free, no-obligation discussion on any mortgage or insurance-related issue, please give me a call on 01723 384558 or 07767 692 653 or email me at mgrayshan@googlemail.com