Bank of England cut the bank rate by 25 bps from 4.5% to 4.25% in its May Monetary Policy Committee meeting. This was the fourth rate cut since August 2024. According to the Bank of England, the underlying UK GDP growth is judged to have slowed since the middle of 2024, and the labour market has continued to loosen. Though inflation increased to 3.5% in April (up from 2.6% in March), Bank of England governor Andrew Bailey has stuck to 'gradual and careful rate stance’ despite uncertainties.
Interest rates and mortgages
Mortgage rates usually are linked to the bank rate. More than 80% of the mortgage holders are on fixed rate mortgage (source: BBC). The mortgage payments for fixed rate will not be affected immediately by bank rate cut. But mortgage holders whose 2-year fixed term ends coming months or quarters, may be able to remortgage at lower mortgage rates. Some banks have already cut their fixed rates by 10 – 20 bps for new purchases and re-mortgages (source: Forbes). In other words, the monthly mortgage payments of homeowners remortgaging in the coming months or quarters will reduce. Those who are applying for new mortgage rates will also get the benefit of lower fixed rates. New buyers may also want to wait for a few months before applying for mortgage in anticipation of rates coming down further.
Economic growth is expected to slow down
The real GDP growth rate in 2024 was 1.1% as per ONS, but the growth stagnated in the second half of the year. In Q1 2025, the GDP grew by 0.7% compared with the previous quarter (source: House of Commons Library). Though the IMF is forecasting the GDP to grow by 1.2%, the OBR has warned about the uncertainty about US trade policies. The labour market is loosening and job vacancies shrinking. Standard and Poor reported that private sector employment in December fell by more than during any month since the COVID-19 pandemic.
Mortgage Payment Protection in times of economic uncertainty
In times of global economic uncertainty, it may be prudent to buy insurance protection to cover your mortgage payments in the event of loss of income due to accident, sickness or involuntary unemployment. Since mortgage rates have come down or expected to come down further in coming months or quarters, insurance premiums will not be a cost burden on mortgage holders. Mortgage holders can use the cost savings in their monthly mortgage payments to buy mortgage payments protection policy, which can help mortgage holders cover their monthly mortgage payments in the period they are unable to work due to accident, sickness or involuntary loss of employment.
Realm Protection Mortgage Protection Insurance
Realm Mortgage Payment Protection Insurance policy pays monthly benefits to cover mortgage payments if the policy holder is prevented from earning an income due to accident, sickness or involuntary unemployment. The Mortgage Payment Protection Insurance policy pays up to £ 2,500 per month, for a maximum period of 12 months, if you do not have an income due to accident, sickness or unemployment. Mortgage payment protection insurance cover is also offered on an own occupation basis. Own occupation means that the policy holder can claim even if they are able to work but are unable to work in their own occupation due to an Accident or Sickness.Realm Mortgage Payment Protection Insurance policy pays monthly benefits to cover mortgage payments if the policy holder is prevented from earning an income due to accident, sickness or involuntary unemployment. The Mortgage Payment Protection Insurance policy pays up to £ 2,500 per month, for a maximum period of 12 months, if you do not have an income due to accident, sickness or unemployment. Mortgage payment protection insurance cover is also offered on an own occupation basis. Own occupation means that the policy holder can claim even if they are able to work but are unable to work in their own occupation due to an Accident or Sickness.
Conclusion
Global trade war can have consequences for the global economy, including countries that are directly not engaged in it. The potential trade war, which usually has an inflationary impact due to tariffs and counter tariffs, at a time when inflation is still elevated, is concerning for economic growth. In such economic circumstances, it will be prudent for individuals and families to get risk protection against unforeseen circumstances such as loss of income due to accident, sickness or unemployment. The lower interest rates, including fixed mortgage rates, provides an opportunity to get mortgage payment protection insurance without increasing the cost burden on you or your family.
Click on this link, if you want to know more about our mortgage payment protection insurance policy.