Bank of England rates at an all time low

The Bank of England has cut the base rate by 0.5% in a move which has seen interest rates fall to their lowest point in the bank’s 315 year history. It is the fifth consecutive month that the base rate has fallen, dropping from 5% down to 1.5% prompting speculation that rates may still have further to fall and could potentially hit 0%.

The significant cut should have a positive impact on those who have mortgage deals which are pegged to the base rate, as their payments should fall in line with the base rate cut. However, for many borrowers this positive impact will not be felt as a result of various measures implemented by lenders which restrict rates falling below a certain point.

Many of the UK’s borrowers have implemented a ‘collar’ condition on many of their tracker mortgage deals. This collar prevents rates from falling below a certain point; it is a lower limit which restricts the base rate bringing mortgage rates too far down. As a collar is a fixed point beyond which mortgage rates cannot fall, borrowers will not benefit from any cuts.

In addition to the implementation of the collar, many lenders anticipated the cut seen today by raising rates on some of the best mortgage deals available. HSBC, for example, raised its rates on its most competitive tracker deal. Other lenders have responded by withdrawing some tracker deals in order to safeguard themselves against the fall in the base rate.

Those with mortgages at a fixed rate are very unlikely to see any benefit and people with savings will see their interest rates fall; reducing the benefits of saving.

As the Bank of England continue in their attempts to bolster the economy by cutting the base rate month-on-month, many will argue that the impact of this will not be seen unless lenders reduce their collar thresholds and allow borrowers to benefit. Many people in the UK are continuing to struggle in maintaining mortgage payments and are seeing little benefit in their savings.

If you are struggling to meet ends meet and are not seeing the benefits of any rate cuts, Swift Capital may be able to help. At Swift Capital we are an equity release UK specialists; this means that we are able to assist you in releasing equity from your home. We will buy any property in any condition, for the possibility of releasing yourself from mortgage payments, contact Swift Capital today.

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