This week, the Bank of England made its first interest rate cut for more than seven years, slashing its base rate from its already historic low of 0.5%, which it has held since March 2009, to 0.25%. It is a move aimed at stimulating the economy after Britain voted to leave the EU in the referendum on June 23.
As a result, homeowners are now being offered the cheapest ever mortgage deals. Rates on popular two, five and ten year fixed rate deals have all fallen to record lows, in a boost to millions of borrowers. According to analysis from financial research firm Moneyfacts, the average rate on a two year fixed rate mortgage has fallen to 2.48 per cent – the cheapest on record. This is down from 4.27 per cent five years ago and 2.68 per cent a year ago. The fall in mortgage rates has dramatically cut the monthly mortgage bills for millions of households.
Those on ‘tracker’ mortgages – where the interest rate automatically goes up and down with the Bank rate – will also have benefitted from this week’s rate cut. Someone with a 25-year £250,000 repayment tracker mortgage paying two per cent interest will now see their monthly £1,100 repayment fall by around £30.
“We have seen many first-time buyers already benefiting from low mortgage rates and being able to enter the market, and a drop in rates will provide an additional boost for those who have been sitting on the fence and holding off making a property purchase decision,” said Séamus Kavanagh, CEO, Townends Estate Agents. “We welcome the Bank of England’s well timed decision and see this as a positive move to support the housing market generally and we envisage seeing a steady improvement in transaction volumes on the back of today’s interest rate announcement.”