Cutting interest rates

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It’s something I have mentioned time and time again. Trackers or discounted trackers will have huge reductions, but that only represents a minority of the mortgage market, with around 40,000 in the UK, I’m not sure how that helps fixed rate borrowers.

Cutting interest rates

Not so long ago, a 0.5 percentage point cut in the official Bank of England interest rate would have been a cause for celebration for most people in Britain. Although, admittedly, rate cuts do tend to translate into a reduction in savings rates, most of us in property-mad Britain have much bigger mortgages than we do savings. Hence, a cut in interest rates tends to deliver us much bigger reductions on our mortgages than it costs us in lost interest on our savings.
Over the past few months, however, the traditional rules simply have not applied. As interest rates were cut by another 0.5 percentage points to all-time lows on Thursday, only the minority of borrowers (those with existing tracker mortgages) had anything to smile about. For the majority – those who are still on fixed rate deals, like me – the rate cuts of the past three months have meant nothing.