Interest rates down to 0.1% - How will this affect borrowers?

We are now living in a time where there is little left to surprise us as we grapple with an unseen health risk and a very uncertain economy.  The Bank of England is constantly monitoring the complexities of the situation and responding with measures which aim to ease the financial burden on borrowers as much as possible.

So, with interest rates at a historically low level, how do you stand to gain from the latest rate cut?

The financial trade body, UK Finance, reports that only 11% of borrowers have tracker mortgages. For those people, this means you should soon see the rate reduction passed on within your mortgage repayments.

For those on standard variable rate (SVR) mortgages, you may also gain by this latest rate cut as many lenders will take account of the latest BoE rate cut within their own base rates.  However, 69% of borrowers who had outstanding mortgages back in December 2019 were on fixed-rates, and therefore, won’t benefit from any change following the BoE rate cut.

That said, even if you are on a fixed rate it’s not necessarily all bad news. This is because all mortgage borrowers whose ability to make mortgage repayments has been affected by COVID-19 are being offered a three-month payment holiday to help relieve the financial burden over the short term.

For those of you considering a remortgage, or if you are paying a standard variable rate (SVR) mortgage, you may benefit by switching to one of the many competitive rates currently available in the market.  Mortgage brokers may advise that if you are considering either a remortgage or a switch to a more attractive rate deal, it could be worthwhile acting swiftly, as the current historically low rates may not be around for too long.

In recent weeks we’ve seen lenders reducing the number of products available to borrowers due to COVID-19, with many closing off their higher loan to values (LTV) deals.  However, there now appear to be a stream of lenders gradually revising their position on this with some returning to higher loan to value deals, including Halifax and Nationwide both of whom have reintroduced lending back up to 85 per cent LTV.

With rates currently so low it’s difficult to imagine that they will fall much further.  Therefore, if you are considering remortgaging within the next few months, this is the time to take appropriate advice and consider all of your mortgage options with the help of a professional financial adviser / mortgage broker.

Many advisers will be happy to provide you with the advice you require (and from a safe distance!) using Zoom, Skype or other technology.

Use our free search function here to find a financial adviser near you.

Published: 11 May 2020