Bank of England cuts rates by 0.25% to 5.5%

Welcome news for borrowers, this will typically save borrowers between £15 & £20 per month on a 100′000 mortgage. Many of borrowers are facing the prospect of more expensive mortgage repayments as they come off short-term fixed-rate deals taken out when interest rates were lower. “This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year.”

The cut was expected by most chief economists as this week’s figures indicated that economic conditions had deteriorated over the past few weeks. The cut is aimed at preventing the slowdown getting out of control. It is the first cut since August 2005. Their view is another 0.25% cut is on the cards due to  CPI inflation still rising.

Will the lenders pass the mortgage rate cut on? Larger lenders such as the Halifax & Nationwide have passed on the saving to mortgage borrowers, so its likely that other lenders will follow suit to stay competitive.