Punishing for savers, a silver lining for some mortgage holders

3 min read

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Becky O'Connor

Personal Finance Specialist


The Bank of England today cut interest rates from 0.25 per cent to 0.1 per cent, in a further emergency measure – how will it affect personal finances?

Becky O’Connor, personal finance specialist at Royal London, said:

For savers

“This is yet more dismay for savers – many of whom are pensioners using cash accounts to store some of their life savings"

“There is still logic to holding cash in savings accounts for short term needs, so this move is really punishing for those who have a lot of money held in cash accounts and nowhere else accessible to store it."

“Savers should continue to scour the market for the best rates available, even if it is a choice between low and very low.”


For credit card and personal loan borrowers

“Base rate reductions don’t make much difference to credit card and personal loan holders. The rates on these personal debts are based more on the borrower’s risk profile rather than central bank rates.


Mortgage borrowers

“The move doesn’t affect most homeowners much either, as relatively few are on variable rate deals."

“The rate cut is a silver lining of the emergency measure for the minority of borrowers on tracker rate mortgage deals, who will see a noticeable drop in their monthly repayments after the two base rate cuts."

“If you are on a standard variable rate deal or another deal that ends soon, it will be worth looking around for a cheaper rate in the coming weeks as you could shave a lot off your monthly mortgage repayments by bagging an historically low rate.”

“Some lenders offer the option to switch from fixed rates to variable for free – it is worth checking with your lender.”


Landlords and renters

“Landlords do not routinely pass on reductions in their own borrowing costs to renters (although some might in the current circumstances), as there are other factors affecting rent levels. So renters are unlikely to see a reduction in their housing costs as a result of the rate cut.”


Small business borrowers

“Small business owners who bank with big lenders who are likely to follow the Government’s mandate to help those who are suffering from the impact of coronavirus should find these loans look cheap on the back of this base rate cut.

“The key will be how quickly and how universally banks pass on the rate cut.”

For further information please contact:

Lucy Field, Press Officer

About Royal London

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £130 billion, 8.8 million policies in force and 4,046 employees. Figures quoted are as at June 2019.

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