The Bank of England interest rate (Base Rate) is the UK’s most influential interest rate and its official borrowing rate. In light of the expected econommic downturn due to the coronavirus (COVID-19), the Bank of England cut the base rate down to 0.25% last week. Now, in an effort to get more money into the system the Bank of England Interest Rate has be cut further, by another 15 basis points, to an all time low of just 0.1%.
“At its special meeting on 19 March, the MPC [Monetary Policy Committee] judged that a further package of measures was warranted to meet its statutory objectives. It therefore voted unanimously to increase the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion, financed by the issuance of central bank reserves, and to reduce Bank Rate by 15 basis points to 0.1%. The Committee also voted unanimously that the Bank of England should enlarge the TFSME scheme, financed by the issuance of central bank reserves.”
– Bank of England
For Brits facing a struggle to pay their mortgages over the next few months, many major banks (including Lloyds Bank, Halifax, Bank of Scotland and Barclays) already promised to pass savings on from the Bank of England interest rate cut as of the 1st of April. They haven’t announced if the second rate cut this month will be passed on but the Bank of England only just made the announcement so it’s too early to hear.
If banks do pass on the rate cuts then it will benefit millions of home owners with mortgages and also landlords with Buy to Let mortgages. However it will only assist you if you are on a standard variable rate or tracker mortgage. If you opted for a fixed rate mortgage then your rate is fixed and just as the interest rate you agreed to pay won’t increase, you also won’t benefit from a decrease.
For commercial mortgages you will need to speak to your lender to determine if there will be a rate cut to ease the pressure on your business. However most businesses will be renting or leasing premises and so it will be the property owner that sees the first benefits.