The 2nd of August 2018 was a notable day for a few reasons. Not only was it the day that Apple became the first American public listed company to reach $1 trillion in value (thats $1,000,000,000,000!!!), nor was it just famous for when Drake was at Number 1 in the charts with a song that caused people to get out of their moving cars and dance alongside them, but more interestingly it was only the second time in the last 10 years that the Bank of England raised interest rates (ok, maybe thats not more interesting but more relevant anyway- don’t hate us because we are finance geeks).
There had been a lot of discussion around this event months in advance, in fact it had been the topic of discussion every time the Monetary Policy Committee (MPC) had met since they had last raised it from 0.25% to 0.5% on 2nd November 2017.
The raise in interest rates affected 3.5 million people on variable or tracker mortgages, increasing their repayments. For those on fixed rate mortgages, their repayments remained the same.
Whilst the rise in interest rates had been expected, what has been a real surprise is how the Bank of England base rate increase has affected the rate lenders have been offering those looking to borrow mortgages.
Whilst some lenders have increased their interest rates on their mortgage deals, it has been a surprise that many lenders have chosen to absorb the interest rate increase and not pass this on to their borrowers, choosing instead to keep their rates the same.
A step further has been Danske Bank. Their rate on a 2 year fixed rate mortgage before the increase on 2nd August was 2.48% (with a 10% deposit). Instead of passing on the increase to borrowers, or even keeping their rate the same, they have bucked the trend and cut their interest rate further from 2.47% to 2.37% (a saving of 0.11%).
With plenty of competition from lenders driving rates further down, this is great news for those looking to buy or remortgage. The MPC meet again in November and there is no guarantee how long interest rates will stay relatively low for, the only thing that is fairly certain is that the interest rate won’t stay at 0.75% for long (and that dancing beside a moving car is not the smartest thing to do).