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It’s good news for the 1.5 million borrowers with Bank Rate tracker mortgages, as last week the Bank of England cut the official interest rates from 0.5% to 0.25%.
Lenders offering tracker mortgages must move the rate in line with the Bank rate, but another 3.5 million borrowers have other types of variable rate mortgages (with interest rates set at the lenders’ discretion), and according to the Council of Mortgage Lenders (CML) their rates may also be cut in line with the Bank of England official rate.
This rate cut to just 0.25% means that for borrowers with a £200,000 25-year term mortgage on a repayment basis, they could save nearly £25 per month or just over £40 on an interest free basis.
However, any rate cuts for a variable rate mortgage is dependent on the lender, as some may have a limit as to how low they will set their mortgage interest rate and they are not obliged to reduce their rate in line with the Bank of England official rate.
It’s advisable that you get advice from your lender, because although they might reduce the rate there could be a slight delay before you see any changes. Several lenders are delaying a rate cut until the beginning of October.
Although this is good news for those who have a mortgage, it doesn’t mean that mortgages for a first time buyer will be any more affordable. Those taking their first steps in owning their own home may find that there is a shortage of properties and prices are still unaffordable, not to mention the lending criteria combined with affordability checks can make securing a mortgage more difficult.
Your home may be repossessed if you do not keep up repayments on your mortgage.
If you would like more information on how the rate changes may affect you, please contact Derngate Wealth today.