The Bank of England has, as expected, cut its base rate to 0.25 per cent after a record seven years at its previous historic low of 0.5 per cent.
Today’s cut may be an important psychological boost to markets and manufacturers but it is uncertain what its impact will be on house sales.
Firstly, it is not clear whether high street mortgage lenders will follow suit and cut their interest rates for borrowers – most are under no compulsion to do so. Secondly, the number of buyers with tracker mortgages that to some extent mirror the movement of the BoE base rate is far smaller than before, as increasing volumes of people have arranged fixed-rate deals ahead of what many expected to be an interest rate rise, rather than a cut.
“Today’s rate reduction will have little impact on the mortgage market. Banks already have very tight margins and may want to focus on savers who are struggling to earn a decent return, rather than cutting rates further for borrowers” cautions Adrian Anderson, director of mortgage broker Anderson Harris.
Even so, agents have welcomed today’s decision.