Bank of England cuts the base rate to almost zero

To help businesses and UK households manage during the global coronavirus outbreak, the Bank of England slashed the base rate twice in as many weeks during the first half of March. In an emergency move, the Bank's Monetary Policy Committee cut the rate from 0.75% to 0.25% on 11 March, then eight days later, it took the unprecedented step of reducing it still further to 0.1%, the lowest level in the history of the bank.

The base rate is the Bank of England's official borrowing rate, which is what it charges other banks when they borrow money. Lenders and financial institutions use it as a guide as to what to charge borrowers and pay savers.

What does the historically low base rate mean for mortgage holders?

Little will change for savers, but the sudden cuts immediately reduced the mortgage bill of some
homeowners, but not all. Whether or not you benefit will depend on the type of mortgage you have and whether your bank passes on the full rate cut to customers.

Homeowners with tracker mortgages (which follow the bank base rate) saw an almost immediate decrease in their mortgage repayments. Although, following the base rate cut, several lenders withdrew their tracker mortgage products for new customers.

If you're on your lender's standard variable rate (SVR), you should see a cut in your monthly payments. Numerous lenders announced either a 0.5 percentage point decrease or a 0.65 percentage point decrease from 1 April.

Anyone on a fixed-rate mortgage will not feel the benefit until their fixed term ends, and they are moved across to their lander's standard variable rate. Having said that, there is an expectation that the dramatic cut will eventually filter its way through to new fixed-rate products.

Today's rate is incredibly low, which is excellent news for anyone looking for a deal and who qualifies. While some people may be tempted to wait to see if there are further drops in the base rate, it is already at a historically low level to lessen the impact of coronavirus on the economy. There is already an abundance of cheap mortgage deals available in the market.

April 2020