There has been a great deal of speculation over when and by how much the Bank of England will cut the base interest rate over the next year, with inflationary pressures coupled with the threat of recession making decisions challenging for the Monetary Policy Committee. A number of industry officials have now said that the state of the economy will result in the central bank cutting rates a number of times over the next twelve months, with some guessing that the base rate could fall to 3.5% next year.
For the past five months the Bank of England has kept the base rate steady at 5%, and officials have pointed out that even a rate cut of 1%, which would probably come about through a series of smaller cuts, could save some homeowners thousands of pounds. Those with a £250,000 mortgage could save up to £2000 a year with a 1% cut if lenders follow suits and also cut their rates in line with the central bank.
Some lenders have already been cutting their mortgage interest rates on some products over recent months, largely as a result of the swap rate – which is indicative of mortgage interest rates – falling. If further rate cuts come about due to the base rate being cut then homeowners could get the financial relief they have been hoping for through reduced mortgage repayments.
Not only will these rate cuts enables existing homeowners to breathe more easily in terms of their finances, but they could also improve prospects for buyers that have been hoping to get onto the property ladder but have so far found that the interest rate and repayment on the mortgage is too high.
Related Posts
Recent reports have indicated that despite the base rate cuts that have been applied by the Bank of England over the past few weeks some homeowners may not actually benefit from these reductions, as many lenders have not passed the rate cuts on. The central bank is expected to cut rates further next year, but some feel that many of the major UK banks will ignore the reductions and fail to pass them on.»

A policymaker from the Bank of England has said that the recent rate cuts are going to take some time to take effect and feed through to the economy. Andrew Sentance reckons that negative performance indicators in the economy will continue into next year despite the recent drastic rate cuts, as these will need time to actually filter through and will not make any immediate difference to the economy.»

An industry official has expressed concern that the Bank of England is effectively losing control of retail interest rates, stating that the recent base rate cuts by the central bank have often gone ignored by lenders, who have continued to raise their interest rates despite the base rate cut. Since December there have been three cuts in the base rate, taking it from 5.75% to 5%, but many lenders have continued hiking up the interest rates on borrowing such as mortgages, personal loans, and credit cards.»

A recent report has highlighted how many British homeowners that have fixed rate mortgage deals in place may be missing out financially because of the cut in interest rates over recent months.»

Recent reports have suggested that the number of people now turning to standard variable rate mortgages is increasing, as borrowers take advantage of the sharp falls in the base interest rate. Just a couple of years ago borrowers were flocking to take out fixed rate mortgages following a series of base rate increases and amidst fears of further rate increases. »

Leave a comment