Most mortgage borrowers on fixed rate deals are not immediately affected, according to UK Finance. They report that 85% of mortgages, totaling 7.1 million, are fixed, leaving around 1.1 million borrowers, or 15%, potentially impacted in the future.
The recent rate cut is expected to result in savings for borrowers with variable rate mortgages. A typical borrower with a £175,000 balance could save about £29 per month, totaling £1,292 annually. Similarly, for a £250,000 mortgage, the monthly savings could be £41 and £492 per year, while borrowers with a £350,000 balance may save £57 monthly and £684 annually.
Although the rate cut will eventually affect fixed rate mortgages, lenders have already adjusted rates in anticipation of the Bank of England’s decision. David Hollingworth from L&C Mortgages mentioned that fixed rate borrowers ending their deals can benefit from falling rates, but advised considering longer-term security rather than solely focusing on the lowest rate.
Many mortgage borrowers, particularly those with fixed rate deals ending soon, are monitoring the situation closely. UK Finance reports that 900,000 fixed rate deals are due to end in the latter half of the year, potentially leading to increased repayments for borrowers on various fixed-rate terms.
The base rate cut may also impact savings rates, prompting banks to adjust their offerings. In light of falling interest rates and elevated inflation, individuals are urged to secure competitive savings accounts promptly to protect their nest eggs. Fixed term accounts are recommended for better returns and stability in the current economic climate.
Looking ahead, uncertainty looms over future rate cuts due to rising inflation levels. The Bank of England expects inflation to peak at 4% in September, up from previous estimates, necessitating careful consideration of further rate adjustments to support economic growth.
Bank of England Governor Andrew Bailey affirmed the ongoing downward trajectory of interest rates but acknowledged the increased uncertainty in predicting their future path amidst evolving economic conditions.