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A local mortgage provider is reducing its fixed mortgage rate after the Bank of England increased interest rates to the highest level since 2008, citing a reduction in swap rates.
That reduction comes as the Bank of England this week upped base interest rates from 5% to 5.25%, affecting millions of mortgage holders, prospective buyers, landlords, renters, and savers.
Aaron Walden, Senior Commercial Manager at Skipton International, said the rate rise was “widely expected by economists” as part of ongoing effort to curb the rate at which prices for goods and services increases.
Nevertheless, the firm has made the move which may “seem strange” to cut rates for homebuyers and homeowners.
“The recent drop in inflation has led to more stable swap rates, which has helped instil some confidence in the market,” Mr Walden explained.
Swap rates are essentially fees agreed to be paid between two parties when things like interest rates are exchanged so that the deal remains balanced and fair despite external volatility.
Its change to fixed rate mortgages is slated for Tuesday 8 August.
He added that savers ought to be encouraged by the interest rate going up as banks or building societies look to improve their offerings.
Skipton are currently reviewing its savings rate and will shortly be announcing changes, he said.
UK banks had been warned by the financial regulator that holding interest rates down on these accounts would be met with robust action.
The Bank of England is forecasting that inflation should fall below 5% by the end of 2023, with the States of Guernsey also expecting a fall by that time.
Pictured (top): Aaron Walden.
Interest rates up again while inflation cools
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