Most home loan borrowers with fixed rate deals are not immediately affected by the recent rate cut, according to UK Finance. Approximately 85% of mortgages, totaling 7.1 million, are on fixed rate arrangements. However, around 15% of borrowers, over 1.1 million individuals, could be impacted in the future.
The rate reduction is expected to provide savings for borrowers with variable rate mortgages. For instance, a borrower with a £175,000 balance could save about £29 monthly, totaling £1,292 annually. Larger savings are projected for mortgages with higher balances, such as £41 monthly on a £250,000 mortgage and £57 monthly on a £350,000 mortgage.
Although fixed rate mortgages will also be influenced by the rate cut, the impact will not be immediate. Lenders have already adjusted their rates in anticipation of the Bank of England’s decision. David Hollingworth from L&C Mortgages mentioned that fixed rate borrowers nearing the end of their deals may benefit from falling rates. However, he advised borrowers to carefully consider their options before choosing the lowest rate.
Many mortgage holders, especially those with fixed rate deals ending soon, are closely monitoring interest rate developments. UK Finance reported that approximately 900,000 fixed rate deals are set to conclude in the second half of the year, potentially leading to increased repayments for some borrowers.
Savers might face disappointment as banks could adjust their savings rates following the base rate cut. Financial experts recommend considering fixed term accounts for better returns compared to easy access accounts. With inflation on the rise, it is crucial for savers to act promptly to secure higher interest rates.
The future trajectory of interest rates remains uncertain due to the current inflation levels. Inflation is forecasted to rise further, with food prices expected to spike in the coming months. Despite inflation concerns, the Bank of England is under pressure to stimulate economic growth by potentially reducing rates.
Bank of England Governor Andrew Bailey affirmed the possibility of further rate cuts to combat inflation. However, he acknowledged the uncertainty surrounding the future direction of interest rates. The central bank faces a challenging balancing act between controlling inflation and supporting economic recovery.