So Bank Rate has been cut to 0.25%. This means mortgage rates will go down too right?... wrong. Chris Longhurst, consultant mortgage broker explains…
Last week saw Mark Carney announce a reduction in Bank Rate from 0.5% to an historic low of 0.25% - the first time we have seen any cuts since March 2009.
For many there was the assumption that this cut would automatically result in a cut to mortgage rates, however as with most things in life these days, it’s not quite that simple.
Although Bank Rate does have some influence over mortgage pricing, the biggest influence comes from the money market LIBOR and SWAP rates.
These are the rates at which banks buy and sell money to each other on a wholesale basis and are reviewed and altered daily, depending on supply and demand.
Money market rates are also historically low and are unlikely to fall much further. In fact since the UK has now been downgraded to a “negative” credit rating it may become more expensive for lenders to borrow money.
So unless you are one of the fortunate ones already on a Bank Rate tracker mortgage I’m afraid it’s unlikely the rest of you will benefit from this drop in Bank Rate.
How long those of you on a Bank Rate tracker mortgages will benefit from these low rates is unknown. All we know is that Bank Rate can’t stay this low forever.
For that reason we are still keen to promote the benefits of taking out a five year fixed rate.
1. You can plan for the next five years knowing exactly what your mortgage payments will be
2. You won’t need to factor in further remortgage costs after two or three years
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