Bank of England mortgages interest rates

Mortgage rates could hit record lows as Bank of England cuts interest rate

The Bank of England has cut interest rates in an emergency response to coronavirus. It could mean record low mortgage rates for residential borrowers and savings for buy-to-let landlords.

The base rate now sits at 0.25%, down from 0.75%. This is the same level it was held at from March 2009 to November 2017 following the financial crash.

The Bank of England stated: “The reduction in bank rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.”

Lenders are expected to react quickly to the surprise cut, even though mortgage rates are already at record lows. Barclays, Bank of Scotland, Lloyds Bank and Halifax have all announced that the saving will be passed on to mortgage holders from 1 April.

What are the cuts?

Lloyds Bank’s homeowner variable rate will fall to 3.74% and its standard variable rate to 2.25%. Halifax and Bank of Scotland are also reducing their variable-rate mortgages to 3.74% from April.

Barclays announced that all existing tracker and variable rate mortgages will reduce by 0.5% from 1 April. New customers taking out a variable-rate loan can benefit from lower mortgage rates immediately.

Virgin Money customers with mortgages linked to the Bank of England rate will see their mortgage costs from 1 May. However, it has not made an announcement yet on its other variable rate loans.

Many borrowers to benefit

Borrowers on a repayment tracker mortgage will make a decent saving. For example, a £100,000 tracker mortgage that drops from 2% to 1.5% will make a monthly saving of about £25 per month.

Those with an interest-only mortgage, residential and buy-to-let, will benefit too. A 0.5% interest rate cut means a saving of about £40 per month for every £100,000 borrowed.

Homeowners on fixed-rate mortgages will not be affected unless they are nearing the end of their term and looking to remortgage. Still, first-time buyers and home movers could all benefit from even lower mortgage rates than we have seen recently.

Could we see mortgage rates below 1%?

The industry is expecting to see five-year mortgage rates reduced further. It’s worth noting that the last time interest rates were at this level some lenders were offering two-year fixed rate deals at below 1% with a large deposit. It will be interesting to see what deals become available to borrowers over the next few weeks.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This is a bold and decisive move from the Bank of England. Swap rates have tumbled in recent days and both the reduction in base rate, plus lower swap rates, will lead to even cheaper mortgage products.”

“We would expect five-year pricing to fall close to its previous record low of 1.29% in 2017 (for a five-year fix from Atom Bank). The big question is, could they fall below 1%?”

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

STAY AHEAD OF THE MARKET

Sign up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
Manchester property investment

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT