UK Interest Rates Slashed
Here at Trusttwo, we've put together this guide to help you understand how the Bank of England Base Rate changes may affect you.
In the wake of Brexit news, the Bank of England has cut interest rates in half, from 0.5% to 0.25%. This is the first time that the rate has been cut since 2009 and means that interest rates are now at a record low.
In addition to lowering the rate now, the Bank of England has also stated that it is monitoring the state of the economy closely. The Bank's Governor, Mark Carney, has also stated that if the economy worsens, the Bank may be willing to cut rates further still.
In addition to the rate cut, the Bank also announced that they would try to stimulate the British economy through a number of measures, including a £100bn scheme that will force the banks to pass on the interest rate cuts to their customers, including businesses and households alike.
Commenting on the announcement, Mark Carney said that the banks will have “no excuse” not to pass on lower borrowing costs to their customers. If they fail to do so, they will face a penalty, he said.
Is this Bad news for Savers?
After the announcement, some banks and building societies cut their interest rates for savers by more than the base rate, penalising savers. In addition, the Guardian reports that some institutions have also quietly withdrawn their regular savings accounts. Other providers have also pulled some accounts for new customers and relaunched them with lower rates.
However, although banks and building societies are quick to pass on the Bank of England rate cut to borrowers, reviews of savings do tend to take longer. So you'll have to watch your bank's announcements carefully to see how the cut may affect your individual account.
Overall, the rate cut appears to be bad news for savers, but great news for those with mortgages or first time buyers. Those with variable rate mortgages are likely to see their monthly repayments fall, while savers will see interest rates fall on their savings as a direct result.
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