Does Base Rate Cut Mean That Lenders Will Cut Rates?
Many consumers may be looking forward to seeing their borrowing costs fall as a result of the recent base rate cut, with senior officials from the government having announced earlier this month that they were shaving 0.5% off the base rate in a move to aid the flagging economy, increase confidence amongst consumers, and ease financial pressures amongst consumers. This was news that was greeted with joy by some industry officials and most consumers.
Most people assume that if the Bank of England cuts the base rate then lenders will also cut their borrowing rates by the same amount, but whilst this may have been true once it seems that it is no longer the case. In fact, a number of industry officials have expressed concern that there seems to be no connection between base rate movement and interest rate movement from lenders any longer, which could make things very difficult for borrowers
Following this latest base rate cut a number of lenders did react quickly and say that they were planning to pass on all of the rate cut to borrowers, and this means that some consumers will be able to cut their borrowing costs following the base rate cut. However, it is not all good news, as some lenders have decided that they will reduce their rates by only a fraction of the amount of the base rate cut, and others have said that they will not be reducing their interest rates at all.
Anyone that is looking for a new loan may find that the interest rates being charged are lower depending on which lender they go to, and those with existing loans may find that their rate is going to be cut if they are on a variable rate loan. Those with fixed rate loans and mortgages will not see any change in their repayments, as the interest rate is fixed for a period of time, and is therefore not affected by any changes in the base interest rate
It is best to take matters into your own hands if you want to save money on your borrowing costs following the base rate cut. As an existing borrower you can shop around and look for more competitive rates on loans, mortgages, and credit cards, and as a new borrower you can compare different financial products from a range of lenders in order to find the most competitive deal and get the most affordable repayments.
For existing mortgage holders it is worth remember that if your lender does not pass on the rate cut then it may be worth remortgaging and going with a lender that has passed the interest rate cut on. However, bear in mind that there could be arrangement fees and other upfront costs involved, so weigh up the costs to check whether the switch is going to be a viable one