Households could save thousands if rate cuts go ahead
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.
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