Base rate fall spurs rush for cheap trackers
With news of a likely base rate reduction, contractors are rushing to grab what could be the last of the competitive base rate tracker mortgage deals before lenders reprice.
Base rate tracker mortgages follow the movements of the Bank of England’s independently set base rate, which has sat at 0.5% since March 2009. Typically, lenders offer a reduced interest rate on these deals compared to a fixed rate mortgage, as the borrower takes on the risk that an increase in base rate would increase their monthly payments – conversely, a drop in base rate would see a reduction in mortgage payments.
With uncertainty continuing to grip the markets, the Bank of England is expected to announce a range of measures to boost confidence. Pundits from CITI, HSBC and BNP Paribas are expecting to see this rate cut to a historic slow of 0.25% when the Bank of England’s Monetary Committee meet on Thursday.
Luke Somerset, Associate Director at Contractor Financials commented “We’ve not seen a credible argument to reduce the base rate for some years now, and this will undoubtedly be exciting news to the numerous contractors who favour these mortgages”.
“The Bank of England need to avoid inaction in the wake of the Brexit and show a true willingness to do whatever it takes to stabilise the markets and a cut to 0.25% would certainly show willing.”
The news has spurred many lenders to increase the margin on their tracker rates, however these remain compelling for those who are prepared to take on some uncertainty over their mortgage payments in the medium term.
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