How would UK mortgage rates be affected if the BoE base rate drops again?
What is likely to happen to UK mortgage rates if the Bank of England BoE base rates were to drop to 0.25% or even 0%? The International Monetary Fund has suggested further cuts but how would this affect mortgage rates if it actually happened? Call Deal Direct for advice.
If you have a BoE base rate tracker mortgage your repayments would reduce as your mortgage rates follow any drop in the BoE base rate. The exception to this would be if your rate is collared, a collar sets a limit on how low the interest rate on your mortgage can go. If your mortgage rate is collared it should be clearly set out in your terms and conditions.
Some economists suggest that it is unlikely that a further BoE base rate cut would affect other UK mortgage rates. Lenders may balance any benefit of BoE base rate cuts against the costs of lowering tracker rates. As we have already seen with the current low BoE base rate, lenders would not necessarily cut their standard variable rates.
While the BoE base rate has remained low a number of lenders have actually increased their rates. A limited number of lenders also have a clause that links their standard variable rate to the BoE base rate by a fixed margin. However if the margin can be changed there is still no guarantee that your rates would reduce if the BoE base rate does.
