July 12th, 2016
Contractors are rushing to grab what looks set to be the last of the competitive base rates on tracker mortgage deals before repricing from lenders begins, amid the likely base rate reduction later this week.
Since March 2009, the Bank of England’s base rate, which most tracker mortgages follow, has been set at 0.5%. Because of the risk borrowers take on tracker mortgages, lenders usually offer a reduced interest rate compared to fixed rate mortgages – this is because if the Bank of England’s base rate increases, so do monthly repayments, on the other hand, a drop on the BoE’s base rate would see a monthly repayment reduction.
However, with the uncertainty within the markets, it is expected that the Bank of England is to announce measures to boost confidence within the buying market. A base rate cut to a historic 0.25% from the Band of England’s Monetary Committee on Thursday has been suggested by experts from CITI, HSBC and BNP Paribas.
Andy McBride, Associate Director at Contractor Mortgages Made Easy, commented; “Arguments for reduction in the base rate have not been seen for some years, but this will of course be great news for contractors who have favoured tracker mortgages over fixed mortgages.”
“In the wake of Brexit, showing a willingness to help stabilise the economy by cutting base rates to 0.25% would mean that the Bank of England is not just standing by but is willing to do what it takes to help.”
The news over rates has spurred lenders to increase the margin on tracker rates, but it still is a persuasive enough argument for contractors who are prepared to take some risk and uncertainty over mortgage payments in the medium term.
Article by: Amy Adams, Marketing Executive at Contractor Mortgages Made Easy
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