Brexit vote could see mortgage rates fall this summer
The decision to leave the European Union could result in lower interest rates, according to the governor of the Bank of England. Mark Carney has hinted that the base rate could be cut in order to support the British economy which has already come under strain following the Brexit vote.
A cut in interest rates could benefit borrowers on a tracker-rate mortgage while fixed-rate deals could also become cheaper. The governor of the Bank of England has suggested that the base rate could be cut further from its record low of 0.5% this summer following the Brexit vote.
Mark Carney has reassured business leaders and investors that the bank’s contingency plans were “working well” considering the economic outlook for the UK has “deteriorated” since the EU referendum verdict.
Carney said: "In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer. The committee will make an initial assessment on 14 July and a full assessment complete with a new forecast will follow in the August inflation report. In August, we will also discuss further the range of instruments at our disposal.”
So, what would a base rate cut mean for mortgages?
Millions of borrowers on tracker rates set to see their repayments fall
A cut in the base rate this summer could benefit millions of borrowers on tracker- or variable-rate mortgages. For example, just under 600,000 people are on the Nationwide building society's ‘base mortgage rate' at 2% above the bank base rate.
A reduction in the base rate to 0.25% - or even 0% - would see the costs of borrowing fall for all these customers, as a spokeswoman confirmed “there is no floor, so if the bank rate was cut, then the rate would reduce".
Borrowers on base-rate trackers can expect to see their repayments fall, although if you are on your lender's standard variable rate (SVR) then you may not see any reduction in your repayments. Many banks and building societies will choose not to reduce their SVR, leaving consumers on rates around 3-4%.
The cost of new mortgage deals is also set to fall over the next few weeks. Mortgage expert Ray Boulger told the Guardian: "All fixed-rate deals should start coming down. We will see many more two-year fixed-rate deals below 1% and five-year deals under 2%.”