The Bank of England made history this week by dropping the base rate to 0.25% from 0.5%, marking the lowest rate on record and the first base rate cut since March 2009. Although widely anticipated, this still caused some shockwaves across the market, spelling good news for homeowners yet burdening savers. Read more about what this means for your mortgage in our latest article, here.
As far as rates are concerned, how have lenders responded to the news?
While Mark Carney insisted banks have ‘no excuse’ not to pass on the lower borrowing costs to customers, some have decided to sit-tight and monitor market-reaction before making a final decision. However, borrowers on trackers rates can still benefit from immediate reductions from lenders already applying these changes, with those on variable rate mortgages able to do so in the near future.
Coventry Building Society was believed to be the first lender to communicate its plans to customers, with Santander, Virgin Money and Barclays reducing their Standard Variable Rates by 0.25% shortly after. Kent Reliance and Aldermore have become the latest lenders to reduce their variable and savings rates by 0.25%, while Nationwide also confirmed to have passed on the reduction to the majority of its borrowers. Rate-linked mortgage deals are now guaranteed to be no more than 2% above the base rate and customers on tracker mortgages can benefit from the full 0.25%.
Nationwide has also now applied a selection of rate cuts to its fixed products, including a 10 year fixed rate at 2.75% up to 60% loan to value (LTV) with a £999 fee, or at 2.89% with no fee. Two year fixed rates were reduced to 1.49% with a £999 product fee or 1.89% with no fee, while two year trackers now stand at 1.29% or 1.69% respectively. Three year fixes also witnessed a cut to 1.79% or 2.09% with no fee, while five year fixed rates are now available at 2.14% or 2.34% respectively.
Elsewhere, TSB announced that existing customers on variable rates will see a 0.25% drop in their rate from September or in August for new customers. Leeds Building Society has equally revealed it will be passing on the changes to Standard Variable Rate (SVR) mortgages, while tracker rates reduced automatically after the announcement.
The same applies to HSBC, dropping its rate for SVR customers from 3.94% to 3.69%. Yorkshire Building Society confirmed tracker rates will be adjusted according to the new base rate subject to minimum rate conditions. Skipton Building Society and Clydesdale & Yorkshire Banks are yet to finalise any changes.
Equally, Mansfield Building Society has launched a new five year fixed rate at 4.25%, which is now available up to 95% LTV for house purchases with no completion fee, as well as offering remortgages up to 90% LTV. In addition to this, a new range of two and three year fixed products have been released, all with free valuation and legal fees. These include a three year discounted rate at 3.49% up to 95% LTV, a two year discounted variable rate at 2.69% between 80% and 90% LTV, or 2.15% up to 80% LTV only. Two year fixed rates up to 90% LTV now start from 2.89%.
Natwest also launched new rates aimed at first time buyers, including two year fixed rates at 2.72%, 2.87% and 2.97% up to 80%, 85% and 90% LTV respectively, with £500 cashback on completion and no product fee. Five year fixed rates are also available at 3.54% up to 80% LTV, 3.57% at 85% LTV or 3.88% up to 90% LTV.
Meanwhile, Precise Mortgages has altered its buy to let product offering, now reducing rates on Houses of Multiple Occupancy (HMOs) and limited company buy to lets. Rates have been reduced by 0.6% for HMOs and 0.55% for limited company mortgages, as well as introducing a two year fixed rate at 2.79% with a 1.5% product fee.
Overall, fixed rates are generally set to remain the same, and if your mortgage tracks the base rate, your monthly repayments are likely to fall in the coming months. There are no longer any tracker rates lower than the base rate, but many borrowers will be lucky enough to pay just a small amount above it, which is now likely to fall.