How is your mortgage affected by the UK interest rate cut?

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How is your mortgage affected by the UK interest rates being cut by the Bank of England? 

You will see in the media today lots of reports focussing on the Bank of England (BoE) announcement relating to an emergency cut in interest rates to shore up the economy amid the coronavirus outbreak. To help you understand how your current mortgage or mortgage application may be affected if at all, we have the following information to share with you. Should you require advice, please contact a mortgage broker.

I am currently in a fixed rate product

  • There are no changes to your product. The rate is secured until the end of that fixed-rate period and your payment and rates will not change. 

I am currently in a Bank of England tracker rate product

  • The provider should communicate with their clients over the next few days and give clarity on the new rate and changes in payment details.

I am currently in the process of fixing (purchase or remortgage ) but have not yet completed

  • Rates remain unchanged at this moment in time. The market is the same as it was last night before the base rate cut.
  • If lenders do drop rates most lenders allow clients to change products free of charge before completion. Barclays charge £150 for this.
  • Lenders do not automatically reduce product rates because of a BoE rate change. 
  • We had an increase of 0.25% in Base Rate in both Nov 17 and Aug 18 which was barely passed onto the market and rates remain very low. 
  • Changing products with the same lender can trigger a new credit score which can create risks if this is done too close to completion.

I am currently in the process of tracking (purchase or remortgage) but not yet complete

  • Assuming it’s the Bank of England rate you are tracking your rate should be lower by the time of completion than first quoted. 
  • No action is needed; the lender will automatically change your rate. 

A few general points for consideration are: lenders never instantly change rates so hold tight until they have decided what to change. Until recently there has been talk of a base rate increase so trackers can go up as well as down. Please bear in mind that this is an emergency cut and increases may follow once Coronavirus is under control.

David Baker – Latest Blog Posts

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