Base rate cut to record low

The Bank of England cut the base rate again on Thursday to just 0.1%, its lowest ever level, in a bid to support the economy during the coronavirus crisis.

Rates had already been reduced by half a percentage point earlier this month, but at a special meeting on 19 March, the Bank’s Monetary Policy Committee (MPC) decided further measures were needed to help the UK weather the economic disruption caused by the pandemic.

Here’s what the latest cut is likely to mean for your mortgage.

Tracker mortgages

Tracker mortgages usually follow movements in the base rate, so the latest cut means you will probably see your monthly payments reduce further. However, some tracker deals have a collar below which the rate cannot fall, so it’s worth checking the small print of your mortgage to see whether you will benefit.

Variable rate mortgages

If you have any other type of variable rate mortgage, or you’re currently paying your lender’s standard variable rate, there are no guarantees that the rate cut will be passed on in full - it’ll be up to the discretion of your lender.

Our SVR watch provides a rundown of which lenders have adjusted their rates. Bear in mind that if you are on an SVR, the chances are you could significantly reduce your monthly mortgage costs by moving to a cheaper deal.

Fixed rate mortgages

If you have a fixed rate mortgage, you won’t see any change in your mortgage payments. It should however, mean that when your current deal finishes, you may be able to lock into a new rate that’s lower than the one you’re currently paying.

We could see some improvement in fixed rates in weeks to come if funding costs remain low. Bear in mind, however, that fixed rate deals are already extremely low, so it’s not guaranteed that they will fall dramatically following the latest cut, as lenders may hold onto some of their already low margins.