The Bank of England has cut the base rate to 0.25 per cent and will also boost quantitative easing by £60 billion.
It comes as a surprise that the Bank is cutting base rate in August rather than keeping its powder dry until the autumn. There is no real market for purchases and sales at present, with many people on holiday so it is hard to see how much of an impact this will make.
With rates already at historic lows, there is not much room for manoeuvre in terms of reductions so the Bank needs to make them as effectively as possible.
Today’s rate reduction will have little impact on the mortgage market. A rate cut will be a bonus for those on variable-rate trackers and it will help encourage people to remortgage. However, many borrowers are on fixed-rate mortgages after Mark Carney, the Governor of the Bank of England, warned earlier this year that the next move in rates could be upwards.
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. However, it is worth checking whether you are on the most competitive rate or whether there is a better deal out there for you.