There has been considerable talk about an interest rate reduction being on the horizon as a result of economic figures and the Bank of England needing to take action to avert a recession. Despite this, the rate reduction we saw yesterday, reducing base rate to 0.25% came as a surprise on the timing.
The Bank of England reacted to the risks of the coronavirus on the economy. Base rate has now been reduced by 0.5% and gone back to the 0.25% where it was for much of the recovery period post the 2008 recession.
It could be argued that the market had very much anticipated a rate reduction as fixed rates have been falling over the past several months to lows that have not previously been seen. There is very little difference now between a buy to let fixed rate and a residential fixed rate with borrowers able to benefit from historically low rates. In some cases it is worth paying a penalty to buy out an existing uncompetitive fixed rate. Lendlord can do this analysis to see how a portfolio can be more profitable by taking advantage of the more competitive rates that are available.
For borrowers on tracker rates and standard variable rates, it is an opportunity to update the data on the Lendlord platform to ensure that each property has the correct rate reflected. Anyone on a tracker rate will benefit from a rate reduction matching the fall in base rate usually from the beginning of the following month following the rate reduction. Anyone on a standard variable rate (SVR) may also benefit from a rate reduction although this is discretionary on the specific lender with whom the mortgage is held.
An SVR can be uncompetitive but even more so when rates fall and lenders do not respond by reducing the rate in line with the Bank of England rate reduction. Using the Lendlord analyser can help demonstrate if savings can be made by moving the mortgage elsewhere. Any move in rate will also have an effect on the cashflow which will adjust with each rate change.
How to check your rate options with Lendlord:
2. Go to “My Portfolio” page and make sure all details are correct:
3. Click on “View Insights” and see your potential savings by switching rate. This takes into account the early redemption fees (please make sure you entered the early redemption % beforehand):
Picture attribution: <a href=”https://www.freepik.com/free-photos-vectors/business”>Business photo created by jcomp – www.freepik.com</a>