The bank of England recently cut rates in an effort to provide some economic relief as Covid-19 causes stock market volatility worldwide. Policymakers reduced the base rate from 0.75% to 0.25%. At the time this matched the historical low of August 2016.
Remarkably, one week later and we saw it knocked down further, to 0.10% – And a new lowest ever interest rate for the history books.
The move is aimed at being proactive rather than reactive to support the UK economy.
The Bank said it would free up billions of pounds of extra lending power to help banks support firms.
Mark Carney, the outgoing governor of the Bank of England said “The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary”
This dramatic rate cuts are positive news for property investors and owner-occupiers alike. The Bank of England lowers interest rates in order to stimulate economic growth, as lower financing costs can encourage borrowing and investing.
The reduction in interest charges for owner-occupiers with variable interest rate mortgages will mean they can afford to spend that money on other goods and services they previously could not, which is the aim of the reduction in the after all.
For investors, a reduction to interest charges on their buy to let mortgages will not only mean a boost to their profitability, but potentially sharper price growth as increased demand leads more buyers into the market.