For the first time in over seven years, the Bank of England (BoE) has cut interest rates to a record low of 0.25 per cent in a bid to bolster the economy, but how it will it affect mortgage holders?
The reduced rate is expected to make it cheaper to borrow money, and in turn encourage spending and investment.
Mark Carney, governor of the BoE, said: “We took these steps because the economic outlook has changed markedly, with the largest revision to our GDP forecast since the Monetary Policy Committee (MPC) was formed almost two decades ago”.
He added: “By acting early and comprehensively, the MPC can reduce uncertainty, bolster confidence, blunt the slowdown, and support the necessary adjustments in the UK economy”.
So what will the cut mean for the estimated 11.1 million households with a mortgage?
For existing borrowers, mortgages will be cheaper depending on the type you’re set on.
While fixed-rate mortgage holders will see little to no change at all, the 1.5 million borrowers with mortgages that track the base rate will see their monthly repayments drop.
For a homeowner with a mortgage of £150,000 and a variable rate of 2.86 per cent, the reduction will likely be in the region of £19.68 per month.
“Borrowers are currently seeing some of the lowest mortgage rates on record and with the predicted rate decrease to the Bank of England Base Rate is only going to boost rates further”, said Charlotte Nelson, a mortgage expert.
For those looking to purchase a new house, or who are still in negotiation with a mortgage provider, it may be well worth seeking professional advice to get the best deal.