8 August 2016

With a unanimous vote across the board, The Monetary Policy Committee (MPC) has announced that the bank rate will decrease to 0.25%. Following economic uncertainty since the EU referendum results, this is quite a momentous decision considering the rate ha

Although the decision will have little impact on new borrowers, if you’re an existing borrower then you’re probably wondering what this means for you, and what your options are now. 

What does this mean for me?

Fixed rate

Typically, you won’t be affected by the bank rate change, as your mortgage is set at a fixed rate. However you can remortgage, but check with your lender first as depending on how near to the end of the mortgage term you are, will depend on how large the early repayment charge will be.

Lender’s standard variable rate

Standard variable rates are set internally by the individual lender. The lender is not obliged to pass on the reduced bank rate, so it’s recommended to speak to your own lender or get in touch with a mortgage adviser who can offer expert advice for your personal circumstances.

Tracker mortgage

Some lenders adopt a ‘cap and collar’ approach whereby regardless of fluctuations in the market, the interest rate on your mortgage will not rise or fall below a certain amount.

Check the terms and conditions of your tracker mortgage to see how the bank rate could affect you, as this will largely depend on what your mortgage actually tracks, such as Libor, or the BoE bank rate.

For those with a tracker mortgage linked directly to the BoE bank rate, for every £50,000 of borrowing on a 20 year term mortgage, the interest rate change would reduce their payment by £6 per month.* 

*Indicative figure, calculations based on £50,000 borrowed over a 20 year term, with mortgage interest rates changing from 2% to 1.75%.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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