Interest rate cut sparks response from banks – see if you will be affected
Thousands of homeowners could see their monthly payments drop after the Bank of England announced a shock cut to interest rates on Wednesday.
Ahead of the 2020 Budget, Governor Mark Carney slashed the base rate from 0.75% to 0.25% to help give households a boost amid the coronavirus outbreak.
Homeowners on variable rate mortgages can expect to see the size of their monthly mortgage repayments reduce, if the deal they are on directly tracks the base rate.
If you're on a standard variable rate (SVR), your lender gets to decide what rate you pay – which means they may not pass the cut on to you.
Borrowers often end up on an SVR when their initial mortgage deal comes to an end.
If you currently have a mortgage, we've got a full guide on what the base rate cut means for your money, here.
Martin Lewis, founder of MoneySavingExpert.com, said: "The financial winners are those on variable and tracker rate mortgages. They will see cost cuts of – very roughly – £25 per month per £100,000 of mortgage.
"And while it'll take a week or two to factor through, it's likely we'll see the rate of new mortgage fixes drop too – meaning it will then be a very cheap time to re-mortgage.
"Most loans, credit cards and other debts will likely be unaffected or only minimally affected because the Bank's interest rate only plays a small part in their rates."
What are the banks saying?
Lending giant Lloyds Banking Group has confirmed that customers with a mortgage which tracks the bank rate and those on reversionary rates will see a reduction of 0.50% by April 1.
This means that SVR deals such as the Halifax standard variable rate will be cut by 0.50%.
Lloyds said it is reviewing its savings rates – but offering a glimmer of hope for savers, it said that changes to savings rates will not reduce by as much as the full reduction in the bank rate.
Metro Bank meanwhile, said it will cut its tracker mortgage by 0.5 percentage points on April 1.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: "The mortgage market experienced a significant fixed-rate war in 2019."
She said that with lenders' profit margins already tight, it is unclear whether they will be able to chop rates on new deals much further.
Springall said: "Those worried about volatility with interest rates in the months to come may wish to consider a five-year fixed mortgage for peace of mind, particularly as the average rate is at a record low.
"As it stands, there may well be borrowers sitting on their standard variable rate hoping this cut will get passed on to them soon, so that they can see a reduction to their monthly mortgage repayments.
"However, with the difference between the average two-year fixed mortgage rate and average SVR standing at 2.47%, it's clear to see the potential benefits of switching."
Mirror Money will update this story as we hear more updates.
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