Most individuals with mortgages on 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 fixed rate, shielding borrowers for now. However, the remaining 15%, around 1.1 million borrowers, may feel the impact eventually.
For those with variable rate mortgages, the rate cut could lead to savings. An average borrower with a £175,000 balance might save about £29 per month, totaling £1,292 annually, as estimated by L&C Mortgages. Similar savings apply to borrowers with balances of £250,000 and £350,000.
While the rate cut influences fixed rate mortgages, adjustments are not immediate. Lenders have mostly adapted these rates in anticipation of the Bank of England’s decision. David Hollingworth from L&C Mortgages mentioned that fixed rate borrowers at the end of their deals may benefit from falling rates, but significant drops are unlikely post the recent cut.
Many mortgage holders who secured low-interest deals in the past are now facing rate adjustments. UK Finance reported that about 900,000 fixed rate deals are ending in the latter part of the year, affecting borrowers with two-year and five-year fixed deals the most.
Savers should also monitor their accounts, as banks might adjust savings rates in response to the base rate cut. Financial experts suggest considering fixed term accounts for better returns compared to easy access accounts. With inflation rising, securing high-yield savings options becomes crucial to prevent erosion of savings’ real value.
The Bank of England is under pressure to balance cutting rates to stimulate the economy while combatting escalating inflation. Governor Andrew Bailey affirmed the likelihood of further rate cuts, but the uncertain economic landscape adds complexity to future rate decisions.
