Base Rate finally lowered
Commenting on today’s decision by the Bank of England to reduce the Base Rate to 5%, Sarah Pennells, Consumer Finance Specialist at Royal London said:
"Finally, after a year of Base Rate holding firm, the Bank of England has made the decision to lower the rate by 0.25 percentage points.
"This is the first time the rate has reduced since it was dramatically cut to 0.1% in March 2020 and will be welcome news for mortgage holders who will now be hoping this rate cut is followed by others in the coming months. We know that many homeowners have been struggling with the effects of high interest rates. Our latest Financial Resilience research showed that those with a mortgage have been paying £362 more in housing costs a month when compared with the same time a year ago. Worryingly, 1 in 8 of those whose mortgage costs had risen were planning to use either a credit card or overdraft to cover the additional cost.
"Ahead of this reduction, lenders have been making cuts to the on-sale mortgage rates with a number of big-name lenders announcing lower rates through the last week. This will be a welcome reprieve for borrowers who were worried about remortgaging to a, possibly, much higher rate.
"Although savings rates have been favourable more recently, it will be interesting to see how providers react to this change in Base Rate. It's vital that savers shop around to see whether there is a better rate available for them if they start to see the interest rate on their current savings account reduced."
Sarah’s tips:
- If you’re nearing the end of your current fixed mortgage deal, you can start to look at your options and secure a new deal with a lender around six months in advance of the mortgage start date. Taking advice from an impartial mortgage adviser can be invaluable. The cheapest interest rate isn’t always the cheapest deal, and they can recommend you the best options.
- If you’re already worried about being able to afford your current mortgage repayments, get in touch with your lender. Contacting your mortgage lender in this way won’t have any impact on your credit file.
- It is much better to have the conversation with your lender early so they can look at available support options with you before you find yourself with any mortgage arrears. Contacting them before you miss payments, or as soon as you’re falling short on payments, means there may be more options available to you to help make your payments affordable.
- Mortgage lenders that have signed up to the Mortgage Charter have said customers who are up to date with their mortgage payments will be able to switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments. The lender won’t need to carry out an affordability check and it won’t affect the customer’s credit score. However, customers who want to go back to their original mortgage term will have to contact their lender within the six-month period.
- If you’re struggling with other household bills or you’ve received letters mentioning repossession, contact a free-to-use debt advice charity, such as StepChange, National Debtline or Citizens Advice, or the financial poverty charity, Turn2us, straight away.
- Savers should make sure that they’re making the most of their tax-free allowance and reviewing the rates offered on existing savings accounts. There can be more attractive options out there as providers tend to offer their highest interest rates on new customer accounts.
For further information please contact:
Nicki Parry, PR Manager
- Email: nicki.parry@royallondon.com
- Mob: 07919 170 043
About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, and in the top 30 mutuals globally*, with assets under management of £169 billion, 8.5 million policies in force and over 4,400 employees. Figures quoted are as at 30 June 2024. Learn more at royallondon.com.
*Based on total 2022 premium income. ICMIF Global 500, 2024