Borrowing is expected to become cheaper as the Bank of England cuts base rate by 0.5% in an emergency today, but savers could also see savings rates fall further.
Today’s announcement means that the Bank of England base rate stands at 0.25%, down from 0.75%. Moneyfacts.co.uk has looked at average rates offered across mortgages and savings over recent years to gain an analysis of what today’s decision means for consumers.
The last Bank of England base rate cut took place in 2016, which saw many fixed average rates fall over a 12 month period. Saying this, rates are already competitively low, to the extent that they may not be able to fall much further, even with today’s announcement.
Mortgage market analysis
|Average Mortgage rates||Mar 09||Aug 16||Nov 17||Aug 18||Jan 19||Today|
|Standard variable rate (SVR)||4.77%||4.80%||4.60%||4.72%||4.90%||4.90%|
|Two-year fixed mortgage||4.79%||2.48%||2.33%||2.53%||2.52%||2.43%|
|Five-year fixed mortgage||5.62%||3.08%||2.88%||2.93%||2.94%||2.73%|
|10-year fixed mortgage||5.76%||3.37%||3.06%||3.10%||3.05%||2.71%|
Average rates shown are as at the first available day of the month, unless stated otherwise.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The mortgage market experienced a significant fixed rate war in 2019, so with margins becoming ever-tighter, it is unclear whether lenders will make sizeable cuts to fixed rates in the aftermath of this base rate reduction. Those worried about volatility with interest rates in the months to come may wish to consider a five-year fixed mortgage for peace of mind, particularly as the average rate is at a record low.
“As it stands there may well be borrowers sitting on their standard variable rate (SVR) hoping this cut will get passed onto them soon, so that they can see a reduction to their monthly mortgage repayments. However, with the difference between the average two-year fixed mortgage rate and average SVR standing at 2.47%, it’s clear to see the potential benefits of switching.”
You can find out how much interest rates impact your mortgage repayments using our Mortgage Calculator.
Along with average mortgage rates falling, the last base rate cut in 2016 saw average savings rates also drop. Today’s announcement will be disappointing news for savers who have already seen average savings rates across most accounts fall over the last 12 months.
Savings market analysis
|Average savings rates||Mar 09||Aug 16||Nov 17||Aug 18||Jan 19||Today|
|Easy access ISA||1.77%||0.96%||0.62%||0.82%||0.94%||0.84%|
Averages based on £10,000 gross rate. Average rates shown are as at the first available day of the month, unless stated otherwise.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “This will be devastating news for savers who are already seeing returns plummet across the market. As we have seen in just the past 12 months, competition is stagnating, and it has become the norm to see providers cut rates to adjust their market position rather than launch headline-grabbing deals.
“It almost seems inevitable at this stage that the base rate reduction could get passed on in full to savers over the next few months, but this then should be a signal for savers to shop around for a new deal. As we have seen time and time again, the biggest high street banks are unlikely to be matching base rate – let alone beating it, so this cut is the perfect excuse to pay out less in interest to consumers.”
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.