When I was buying my first property 25 years ago, the mortgage rate in the UK was around 11.3%. Since then, it has at times been painfully higher, and for the past decade, thankfully lower as the graph of UK banks’ base rates shows. Earlier this year, I negotiated to move on to a tracker mortgage. And while I will allow myself a pat on the back, I will also confess that I never imagined I would see the amount of interest I pay fall to the level it has following the Bank of England’s decision to cut its key rate to just 2%. The astonishing thing is that rates appear to be going even lower.
Clearly, we are in a new paradigm and apparently independent central bankers around the world are playing a new game. Where once they all followed the leader and tried to prove how tough their anti-inflationary credentials were, they are all now, as Bank of America hints in research yesterday, engaged in a rate-cutting championship.
| UK's central bank base rate |
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| Source: Bank of England |
“Extraordinary times make for extraordinary decisions, and laggards can become front-runners in no time.