What do the base rate cuts mean for me?

The Bank of England announced another emergency cut today, taking borrowing rate costs down to the lowest in history.

The drop in the Bank of England base rate from 0.75% to 0.25% and then to 0.1% has big implications for anyone who has borrowings or savings.

If you have a mortgage with a variable interest rate, or you’re on a deal that tracks the base rate, you can allow yourself a mini fist-pump – your monthly costs should come down.

If you have a tracker, this might happen with your next monthly payment or the one after.

With a variable rate, it could take a little longer and will depend on how quickly your lender reacts to the Bank’s announcement.

What might be worth thinking about is fixing your rate.

Lenders will soon be offering deals that reflect the new base rate, and it could be worth locking into one once they become available.

After all, rates can’t fall much further, but they can always go higher, so fixing at today’s level might well make sense.

If you’re on a fixed rate already, your rate and your repayments won’t be affected by the reduction in the base rate.

You could work out whether you would save by remortgaging onto a lower rate – but bear in mind that you might face an exit penalty alongside a raft of other fees.

The same applies to personal loans, where the interest rate is usually fixed for the duration of the deal.

Cheaper rates might become available, but ditching one deal for another could actually cost more once you’ve paid any penalty.

You can check for the latest mortgage rates on our website and get access to free expert mortgage advice specific to your situation.

While the base rate cut is good news for borrowers on variable rate deals, there’ll be no mini fist-pumps from savers following the announcement.

Base rates have been below 1% for over a decade, and this has been reflected in the rates paid by savings accounts.

The cut in the base might lead to even further reductions, which means it’s more important than ever to shop around to get a deal that squeezes the maximum amount out of your savings.

That could mean locking into a fixed rate, or finding an account that has an attractive opening rate offer.

If you go for this option, make a diary note to switch again once the offer comes to an end.

And don’t forget that some current accounts pay interest, often at higher levels than savings accounts – but only on a limited amount of cash.

Whatever your situation, just try to make sure you shop around to find the best possible home for your hard-earned money.

Base Rate Calculator

Find out how much your mortgage payments and savings will be affected by the change in the Bank of England base rate.

Your mortgage

You can usually find the balance that you owe, your current interest rate and how many years are left either:
• In your online banking statement
• By phoning your bank
• Or by taking a look at the last annual statement you have been sent.
Fixed mortgages are the most common short-term deal offered by lenders. If you have remortgaged (ie, moved to a new interest rate) within the last two years, there's a good chance you likely have a fixed rate deal - this means your rate can't be increased for a set period.

Your savings

You can find this in your online banking, by phoning your bank or on your monthly/annual statements
Fixed rate savings accounts pay you a set rate of interest for 1-5 years. They can be great to give you certainty of what you'll earn, but the rate won't increase (or decrease) during the fixed time period, meaning there is no benefit from a base rate rise.

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Your base rate results

As your rates are fixed, the payments or interest won't change in the short term.

However, check when your fixed term ends, and be prepared to switch to the best deals available. You can compare mortgage deals or get mortgage advice from our brokers.

Your base rate results

Good news! Overall, you are likely to be around £ better off over the next year as a result of the Bank of England's decision to its base rate by %

Unfortunately, it looks like the Bank of England's decision to its base rate by % could leave you
£ worse off over the next year

The change in base rate doesn't actually mean anything for you. It's not going to leave you any better or worse off.

In detail...

Your mortgage

Your mortgage costs will not over the following year as your mortgage is fixed

Your mortgage costs could by around £ per year, with new monthly payments of £

Your savings

The interest you earn from your savings will not change over the following year as your interest rate is fixed

You could earn around £ in savings interest per year.You can earn up to £1000 a year in savings interest without paying tax (£500 if you're a higher rate taxpayer). If you earn more than that, please note that the excess will be subject to your normal income tax rate.

Your savings won't be affected by the change in the base rate.

So what next?

You may be able to increase the amount of interest you earn on your savings. Take a look at the Top Savings Accounts.

As your mortgage isn't fixed, it's likely your monthly payments will decrease. It's also likely that you're free to move to a different rate or even change lender to lock in a lower rate. You can compare mortgage deals or get mortgage advice from our brokers.

Your rates are fixed, so while you won't be affected by recent changes to the base rate, it doesn't mean you can't save money.

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