What Would Negative Interest Rates Mean for Mortgages?

What would it mean for UK mortgage borrowers if the Bank of England reduced interest rates to 0% or even into negative territory?

Faith Glasgow 13 April, 2021 | 9:03AM
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Never, since the Bank of England (BoE) was established in 1694, has the UK base rate of interest been so low. It has sat at 0.1% since early 2020, having been cut in response to the economic stress of the Covid-19 pandemic. This has been a boon to mortgage holders, who have enjoyed a knock-on effect of lower mortgage rates, but a juggling act for first-time buyers or anyone looking to remortgage and wondering which way rates will move next.

However, there’s still the possibility that interest rates could go down further still - into negative territory. The most recent quarterly Monetary Policy Committee report, published in early February, asks banks to make plans for the possibility of negative interest rates in July.
It’s a fallback position, only to be implemented if the forecast economic recovery doesn’t materialise as the UK economy slowly opens up. Nonetheless, it does raise some interesting questions for anyone with a mortgage.

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About Author

Faith Glasgow  Faith Glasgow is a freelance journalist specialising in pensions and investment trusts

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