Two members of the MPC wanted to reduce Bank Rate by 0.5 percentage points, to 4%, while two others preferred to maintain Bank Rate at 4.5%.
Inflation has fallen over the past two years, giving the Bank the ability to ‘withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory’.
What does the cut mean for existing mortgage borrowers?
If you have an existing fixed rate mortgage, you won’t be affected by interest rate movements until the end of your agreed fixed period, so today’s announcement won’t impact your repayments.
If you have a tracker mortgage, your pay rate should fall by 0.25 percentage points in the next month. A £200,000 25-year repayment mortgage borrower could see their payment fall by around £29 a month as a result of today’s cut, according to L&C Mortgages.
If your mortgage is variable – such as a discounted rate, a capped rate or you are on your lender’s standard variable rate – your rate may fall in the coming weeks, although this is at your lender’s discretion and it may not be by the full 0.25 percentage points.
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What about new deals?
If you are a looking for a new mortgage – either to buy a property or because you are coming up to remortgaging, you might be hopeful for lower rates on new deals. In fact some lenders have already cut their mortgage rates in the last few weeks, so it’s unclear if they will fall further.
David Hollingworth, associate director at L&C Mortgages, explained: “The good news for fixed rate borrowers coming to the end of a deal is that rates have been falling.
“That’s because today’s cut was so widely expected that it’s already allowed lenders the chance to improve their rates. There’s still plenty of tweaking of rates in the market but fixed rates are looking to predict what will happen rather than react to base rate movement, so we are unlikely to see fixes plummet further because of today’s cut.”
Rightmove’s mortgage expert, Matt Smith, was more optimistic that rates could fall even further. He said: “The much-anticipated second rate cut of the year has arrived, and with some lenders having taken their time to pass on the benefits of the expected Bank Rate cut, I think we may now see further reductions in the coming days and weeks.
“A fresh round of mortgage rate reductions could be a boost for buyer demand as this year’s Spring Selling season approaches its end.”
