Welcome Rate Cuts for Mortgage-Owners
The Bank of England unexpectedly cut its base rate by 0.5% yesterday, bringing financial relief to thousands of homeowners as monthly mortgage repayments will now fall.
The Bank of England cut its rates yesterday by 0.5%, to 4.5%, in an attempt to rescue Britain from a looming recession. The move, expected to come 24 hours later than it did, will help mortgage owners by reducing their monthly repayments quite significantly.
For example, for those with a mortgage of £200,000 the monthly repayments will fall by approximately £60 a month – welcome relief during the credit-crunch. It is also thought that this move will help first-time buyers looking for fixed-term products and those looking to re-mortgage.
Central banks around the world have all coordinated similar cuts in an attempt to prevent a global recession. The US Federal Reserve has reduced rates from 2% to 1.5%, the European Central Bank has reduced from 4.25% to 3.75% and similar moves have been made by Canada, Sweden and Switzerland.
Many top high-street lenders, including Halifax, Lloyds and Barclays have already cut their rates in line with the Bank of England’s latest announcement, and many more are expected to follow shortly.
The government has justified the decision in a statement that announced that inflation is expected to rise to over 5% before dropping back down to approx 2% in the near future, making this move necessary.
The move has largely been welcomed by financial experts, although the government has also been criticised for not stepping in sooner, with many believing the current crisis could have been held off had this decision been made six months ago.
In order to be effective it is hoped that the relevant markets will respond positively in order to prevent Britain from sinking further into the well-publicised recession that is expected to take hold.
