Base rate cut to 0.25% and how it could effect your mortgage

The Bank of England recently cut the base rate for the first time in more than seven years, reducing it from 0.5% to a new historic low of 0.25%.

To find out how this is most likely to effect your mortgage we went straight to the Money Saving Expert himself, Martin Lewis.

We found this analysis from Helen Saxon, Chief Product Analyst for MSE and thought it would be a useful read for our clients.

Max your mortgage - including should you ditch your fix?

Some will see mortgages get cheaper after the base rate cut. Whatever the impact, if you are coming to the end of your fix or tracker, pounce on a new deal as your rate will likely rocket soon.

Fixes are fixed

Check if you'll save by ditching yours fixed rate mortgage?  They account for half of mortgages, and as the name suggests, rates WON'T change during the fixed period. That doesn't mean do nothing.

Use MSE's Ditch your fix? tool to check if you can save by switching from a pricey fix. For example, if you've a 3.49% fix with 23mths left on a £100,000 mortgage, you could save if you can switch to anything better than a 1.51% fix with a £1,000 arrangement fee, even taking into account £2,800ish extra switching fees. It won't work for all, so check via the tool.

Will your lender cut your standard variable rate (SVR) or 'discount'? 

SVR's tend to move at a lenders' whim as they're not directly linked to base rate. So far only half of lenders' have confirmed plans to make cuts.

SVRs, which average 4.8%, are pricey, so don't automatically stick even if your rate is cut. You'll usually be on an SVR when your fix or tracker ends. A 'discount' follows the SVR at a set rate, eg, if the SVR is 4% and the rate is SVR minus 1%, it's 3%.

Check when your tracker mortgage will fall

These 'track' the base rate, so for the 1.5 million with a tracker, mortgage costs should drop by an average £20/mth on a typical £150k mortgage. See MSE's lender-by-lender update for when each plans to cut the rate. Most will be from September but some, such as Virgin, will make customers wait till October.

A tiny number won't see rates drop where their deal has what's called a 'collar', which prevents rates falling below a certain level. You should be contacted by your lender if you're impacted.

What if you're looking for a new mortgage?

Rates could fall a touch, though the Bank of England expects any will be limited.

Should you wait for the cuts?  MSE's message for months has been mortgage rates are ultra-low already. That hasn't changed, so why wait, especially if you've an offer?  Also, if buying a new home, you may risk losing it by dallying.

To read the full article and for a wealth of money saving tips and tools, go to

Posted on Monday, August 15, 2016