More money for UK households
Last week the Bank of England announced a drop in their base rate, taking us to a new historic low of 0.25%. This is good news for many UK households who are expected to benefit from having more money in their pockets.
One in five households are currently on a tracker mortgage which means they’ll enjoy an immediate drop in their monthly mortgage bills. It will take longer for the cut to filter through to the 29% currently on a Standard Variable Rate (SVR). Despite some lenders not passing on cuts in the past, the Bank of England is applying ample pressure to ensure all lenders pass on the saving to customers.
Why does the Bank of England want more money in the pockets of UK households? The economy has slowed a little post Brexit and its believed that by reducing outgoings, more people will be out spending, giving the economy the boost it needs to keep the country out of recession. Its estimated that the average household will benefit from a £22 monthly saving.
It also marks a great opportunity to use this period of historically low interest rates to re- organise your finances. Repayments on unsecond mortgages, credit cards, hire purchase, mail order, etc. can soon add up and put a lot of pressure on those who are faced with juggling multiple debts. With the average unsecured debt per household set to reach £10,000 by the end of the year, debt consolidation could be an important and effective strategy for getting more money in the pockets of UK households, to the tune of hundreds of pounds, far outweighing the expected benefit of the base rate cut.
For example, recent customers, Mr and Mrs B aged 44 yrs and self-employed had accumulated £50,000 of unsecured debts having invested heavily in their business. Whilst no repayments had been missed, many of the debts were on credit cards and the high interest charges meant the overall balance was not reducing, despite steep monthly repayments. We helped the couple find a second mortgage that reduced their monthly repayments by £641. This has alleviated a lot of stress and the couple are able to make overpayments or repay the amount in full with no early repayment charges once their business picks back up.
We’ve helped many customers to re-organise their debts, reduce monthly outgoings and save money. With the recent announcement on the reduction in base rate, the range of low cost finance available provides a great opportunity for customers to significantly reduce their monthly outgoings and save money. It’s important to plan ahead for the future and by re-organising debts in this way, we believe households will be far better equipped to weather any future increase to interest rates. Although we can be confident rates will stay low for a while, inevitably they will increase in the future.