Bank of England Cuts Base Rate to 4.75%: What It Means for Homeowners

The Bank of England has cut its base rate by a further 0.25%, the second drop this year, bringing rates down to 4.75% - the lowest they have been for more than a year.

This will have a positive impact on Tracker mortgages, and in theory Variable Rate and Discount Rate mortgages too – although people often forget that there is no obligation on lenders to drop these at the same time, nor by the same amount.

If you are on a Fixed Rate mortgage, I am afraid it means no change – but depending on what your rate is currently fixed at now, it may be worth a chat with your mortgage broker to discuss current fixed rates available, vis a vis the rate you are paying currently and any early redemption fees due.

If you are looking for fixed rate products to drop in a hurry, our advice is to not live in too much hope for the time being.

The base rate falling is, generally speaking, likely to be a positive thing for Wiltshire homeowners, but nevertheless mortgage product rates, whilst influenced by the base rate, are really more influenced by money markets, and money markets have already factored this rate in.

In fact, as we have reported in other posts recently, this particular 0.25% cut was pretty much nailed on… in fact, were we gamblers, this one wouldn’t have been worth the bet, so short were the odds.

Banks and Lenders are gamblers in a sense, although realistically they are educated risk takers, and the cost of money – and therefore the product rates you will see on 2 and 5 year fixed rate mortgages – are being priced in based on their predictions (or bets) for where the market goes in the next few months or even years, and that means factoring in other things: the Labour Budget announcements last week; higher fiscal borrowing; a weaker pound; the result of the US election – although in fact, the stock market reacted well to the news of a Trump presidency, with the Dow soaring by 1500 points in a single day, and the dollar jumping in value, compounding the lowered value of the Great British Pound.

It's a step though, and the fact that it indicates lower inflation – and therefore higher consumer confidence – is the bigger news story when it comes to the housing market and the tangible effect this particular base rate cut will have.