The Bank of England recently cut interest rates from 0.75% to 0.25% in an emergency move to boost the economy on the 11 March this year. This cuts will affect borrowers differently depending on the type of mortgage they have.
Here’s a Summary of How The Interest Cut Will Impact Individual Mortgages in the UK.
Base-rate tracker mortgages
Buy to let mortgages
The majority of mortgages in the UK are fixed-rate mortgages and for borrowers with this type of mortgage, the interest rate cut will make no difference to their repayments until it’s time to remortgage. Borrowers whose fixed-rate mortgage terms are almost up should benefit from some good remortgage options, however.
For borrowers with tracker mortgages that move in line with the Bank of England base rate, mortgages will become immediately cheaper. They represent about 11% of the UK mortgage market. The amount that they will save depends whether the mortgage is an interest-only or a repayment loan, with interest-only mortgages seeing the most savings.
With variable-rate mortgages, the amount borrowers pay every month can be changed by their financial provider so these borrowers must wait to see how their home loan provider reacts at a time when mortgage rates are already at very low levels. About 16% of UK mortgages are variable-rate.
Most buy to let mortgages are interest-only as that is the most tax-efficient way for landlords to borrow money so these buy to let mortgages will definitely save money with the interest rate cut.
For people looking for a new mortgage, there are likely to be some good 2-year deals available to them as well as some 5-year deals. Speak with our experienced mortgage advisers at Propillo to find out what deals are currently available and to find out how much deposit you are going to need.
With the majority of homeowners in the UK on a fixed-rate mortgage, the cut in interest rates won’t have a large impact on their existing mortgages. The cut will, however, offer up some good deals for first-time buyers and for those looking to remortgage. That said, the Bank’s rate cut is designed to be temporary and rates could rise again in the near future.
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