Bank of England Update: Further Cuts to Interest Rates and What it Means for Your Mortgage

For the second time this year, the Bank of England has made further cuts to the base interest rate, taking it from 5% in August to 4.75%. This drop was widely anticipated as inflation had dropped to below the bank target of 1.7% in September. The big question on most people’s lips is, “How will this drop impact mortgage payments?” Keep reading to find out...

Understanding the Latest Update from the Bank of England

On Thursday 7th November, the bank cut interest rates by 0.25%, taking the base rate of interest to 4.75%. Rates are thought to gradually continue to fall from here, which is positive news to most of us around the UK, however, the inflation forecast is set to rise by up to half a percentage point over the next 2 years, from Labour’s bumper budget announcement, which will slow the decline in interest rates significantly.  

Mortgages: What Impact Will this Latest Announcement Have?

For those on tracker and SVR (Standard Variable Rate) mortgages, they will see a drop in line with the bank's cuts almost immediately, however, the almost 7 million homeowners on a fixed rate mortgage won’t see any change until their contract comes to an end. Those who are due to renew their fixed-rate deals in the near future, however, will see a drop in some lender's rates. For those on tracker mortgages, the current tracker rate according to the banking body of UK Finance is 6.44%. A 0.25% cut would make it 6.19% and the average SVR which is currently 7.95% would mean that monthly payments for a £150,000 repayment mortgage with 20 years remaining would drop by £23 per month, from £1,250 to £1,227. Next year is set to see further interest rate cuts however, the bank is expected to increase slightly after the budget announcements on the 19th December and 6th February.  

What to do if You're Worried About Mortgage Availability

Some lenders, due to the budget and to some extent the US election, have sensed market volatility, causing them to keep interest rates on new fixed-rate deals slightly higher than expected. Moneyfacts has stated that the average 2-year fixed-rate mortgage deal has increased slightly to 5.42% and the average 5-year fixed-rate deal has risen to 5.13%. As far as the market goes, lenders have mixed feelings about higher or lower rates on new products, leaving homeowners with mixed feelings about their budgeting for the rest of the year. If you’re still feeling the burden of higher interest rates on your mortgage payments, Taylormade, an independent mortgage advisor in Manchester can help.  

You Can Put Your Trust in us, Your Expert Mortgage Advisor in Manchester

Taylormade can offer a wealth of knowledge and experience and is able to find the best deals on the market today, giving you peace of mind when it comes to a volatile mortgage market. We are a specialist mortgage broker in Manchester, also operating throughout the UK, and we have the scope and experience to scour the market for you, taking the hard work out of a stressful situation. So, contact TaylorMade today: we are the leading mortgage advisor in Manchester.