What will the cut in interest rates by the Bank of England mean for homeowners and buyers? Read more: http://www.dailymail.co.uk/property/article-3723554/What-cut-rates-Bank-England-mean-homeowners-buyers.html#ixzz4GvEZ4oqk Follow us: @MailOnline on Twitter | DailyMail on Facebook
Many homeowners will be rejoicing at the news of today's historic cut in interest rates by the Bank of England to 0.25 per cent.
The question for many borrowers though is whether the cut will flow through to the mortgage rates offered by lenders.
For those with variable mortgage deals or looking to remortgage, it is likely to translate into lower monthly mortgage payments.
Historical lows: How interest rates have changed between 1976 and 2016
Those remortgaging are already enjoying substantially lower rates compared to the last recession and this trend is expected to continue.
The average two-year fixed rate mortgage has dropped from 4.79 per cent in March 2009 to 2.48 per cent today, according to Moneyfacts.co.uk.
Charlotte Nelson, Moneyfacts' finance expert, said: 'Borrowers have already been enjoying some of the lowest rates on record and the 0.25 per cent cut to the Bank of England Bank Rate will provide further impetus to the rate-cutting trend.'
The cut may also be welcome news for those on their lender's standard variable rate, she said. If the cut is applied to the average SVR at 4.8 per cent, it translates to a drop of £28.64 in monthly mortgage repayments, Moneyfacts said.
Rates may become so low that even those on fixed rates may be better off by moving onto a cheaper deal once any early repayment charges are taken into account.
Andrew Montlake, director at Coreco Mortgage Brokers, said: 'Competitive pressure remains strong and should ensure the current crop of low rates continue for the foreseeable future, with the potential of even lower offerings over the coming weeks.'
Homeowners sitting on their lender's standard variable rate could see their monthly mortgage payments reduced
Some lenders may decide to wait and assess the market before making any cuts to rates - although Santander has already confirmed it will be pass on the cut to its mortgage customers on an SVR.
Mr Montlake added it is 'not a foregone conclusion' that someone will necessarily see the deal they want fall as some lenders have a 'collar' or floor below which they will not reduce rates further.
'As far as fixed rates are concerned, swap rates (which lenders use to price their loans) have fallen dramatically since the Brexit vote so (lenders) have to some extent already priced in a cut such as this.'
However, the cut may not be as good news for first-time buyers.
While they may also have cheaper mortgage monthly payments in mind, cutting rates is aimed at improving confidence in the housing market.
Increased confidence is likely to lead to higher house prices – something that could push home ownership further out of reach for first-time buyers.
Mark Hayward, managing director of National Association of Estate Agents, said; 'Today's interest rate cut announcement will be welcome news for many current homeowners.
'However, it represents a body blow for savers and those hoping to get their first foot on the property ladder. Cutting interest rates further is likely to improve confidence among those prospective house-buyers who may have put their search on hold, following the Brexit vote in June.
'But for those saving to pay a deposit on a future home, the interest rate cut will be frustrating. The last government focused heavily on supporting first time buyers (FTBs), with the introduction of schemes such as Help to Buy. Many of those looking for help now will have to wait for initiatives such as the Lifetime ISA to launch, which will then only help those under 40 to save for a home.
'The outcome of the today's rate cut is simple - we will see aspiring homeowners saving harder for longer, which will no doubt have an impact on the number of first time buyers succeeding in their dream of acquiring their own home.'
Read more: http://www.dailymail.co.uk/property/article-3723554/What-cut-rates-Bank-England-mean-homeowners-buyers.html#ixzz4GvEgthQL