What happens to your finances now Bank of England has cut interest rates due to coronavirus? Winners and losers revealed

SAVERS are likely to be the biggest losers following the Bank of England's shock decision to cut its base rate today - but homeowners could benefit.

The UK's central bank has dramatically slashed the rate used by other banks and lenders to set their own interest rates by 0.5 per cent from 0.75 per cent to 0.25 per cent.

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The Bank of England says it's taken the decision as an emergency measure to tackle the impact the coronavirus outbreak is having on the economy.

It's hoped the rate cut will make it cheaper for businesses to borrow cash, which in turn should get money flowing through the economy.

The move comes as Rishi Sunak gears up to deliver his first Budget today after taking over as chancellor following Sajid Javid's shock resignation in February.

But while this first base rate cut seen since August 2016 is aimed at the economy and businesses, it could have an impact on our personal finances too.

Here's our round-up of the likely winners and losers.

WINNERS

Homeowners - mortgage rates could fall

While some banks The Sun asked say they're still reviewing the base rate cut, the following have revealed changes:

• Bank of Scotland, Halifax, and Lloyds Bank: All Halifax and Lloyds Bank tracker rate and variable rate mortgage holders will see rates cut by 0.5 per cent by April 1. Bank of Scotland doesn't sell own-branded mortgages.
• Barclays: All of its standard variable and tracker rates will fall by 0.5 per cent from April 1.
• Clydesdale Bank, Virgin Money, and Yorkshire Bank: All tracker rates for Virgin Money customers will fall by 0.5 per cent from May 1, and from their next payment date for Clydesdale and Yorkshire customers. Standard variable rates at all three brands will also fall by 0.5 per cent from April 2.
• Co-operative Bank: All tracker rate mortgages and the standard variable rate will drop by 0.5 per cent from April 1.
• First Direct: The tracker rates have automatically dropped by 0.5 per cent, while the standard variable rate will fall by 0.5 per cent from April 1.
• HSBC: All tracker and standard variable rates will fall by 0.5 per cent within 24 hours and by April 1, respectively.
• Metro Bank: All trackers linked to the base rate will fall by 0.5 per cent from tomorrow, while the standard variable rate will drop by 0.5 per cent from April 1.
• M&S Bank: All tracker rate mortgages and the standard variable rate will drop by 0.5 per cent from April 1.
• Nationwide Building Society: All tracker, base mortgage and standard mortgage rates will drop by 0.5 per cent from April 1.
• Santander: Its standard variable rate and other mortgages linked to the base rate will drop by 0.5 per cent from the beginning of April. These include trackers, follow-on rates (an alternative to its standard variable rate) and so-called flexi mortgages, which are no longer on sale.
• TSB: All variable mortgage rates will fall by 0.5 per cent on April 1.

Martin Lewis, founder of MoneySavingExpert.com, explains that those on variable and tracker mortgages should benefit from the rate cut, while those taking out fixed mortgages could benefit too.

Of course, those on existing fixed deals are unlikely to see any change.

He said: "The financial winners are those on variable and tracker rate mortgages. They will see cost cuts of – very roughly – £25 per month per £100,000 of mortgage.

"And while it'll take a week or two to factor through, it's likely we'll see the rate of new mortgage fixes drop too – meaning it will then be a very cheap time to remortgage."

Martin adds that you can use his to work out your exact reduction in repayments once you know your new rate.

According to banking trade body UK Finance, as of December 2019, there were 0.9million outstanding trackers loans (11 per cent of mortgages), 1.3million outstanding standard variable rate loans (16 per cent), and 5.7million outstanding fixed loans (69 per cent).

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "We would expect five-year pricing to fall close to its previous record low of 1.29 per cent in 2017."

The average five-year fix currently stands 2.73 per cent, according to financial provider Moneyfacts.

Credit card borrowers - rates could be cut

While the majority of banks The Sun asked say they're still reviewing the base rate cut, the following have revealed their credit card rates:

• Bank of Scotland, Halifax, and Lloyds Bank: All lending products with elements that track the Bank of England base rate will see the decrease reflected in their rates.
• Barclaycard: All Barclaycard credit cards track the Bank of England base rate. This means the standard and cash rates on all Barclaycard products will drop by 0.5 per cent. Barclaycard's Premier Charge & Woolwich accounts, which are no longer on sale, don't track the base rate so these are unaffected.
• Co-operative Bank: The interest rates of credit cards that track the base rate have dropped by 0.50 per cent today, March 12, but the others will remain the same.
• Metro Bank: Its credit cards are not linked to the base rate and there are currently no changes planned.
• TSB: The interest rates on credit cards will drop by 0.50 per cent on April 1.

Andrew Hagger, personal finance expert at comparison provider Moneycomms added: "If your credit card provider is one that links your rate to base rate you will see cheaper borrowing costs but the impact will be minimal - 0.5 per cent less on a £2,000 credit card balance equates to just £10 savings in interest in a year - less than a pound a month."

But Martin Lewis says the impact on loans, credit cards and other types of debts is likely to be minimal.

He said: “Most loans, credit cards and other debts will likely be unaffected or only minimally affected because the Bank’s interest rate only plays a small part in their rates."

Small and medium businesses - cheaper access to loans

Alongside the base rate cut, the Bank of England has introduced a new funding scheme with additional incentives for small and medium-sized enterprises.

Federation of Small Business national chairman, Mike Cherry, said: “The £100billion cash injection into banks earmarked for small business lending will hopefully throw a lifeline to firms suffering from cashflow issues.

"More than a third of small firms that secure new finance use it to manage cashflow, so it’s absolutely critical that this new funding makes its way to small firms in need as swiftly as possible."

But some commentators say this still won't be enough to boost the economy.

LOSERS

Cash savers - interest rates could be cut

The only major banking group The Sun spoke to that would confirm the exact impact, if any, on savings rates was Lloyds Banking Group:

• Bank of Scotland, Halifax, and Lloyds Bank: It says changes to savings rates will not reduce by as much as the full 0.5 per cent reduction in base rate but has yet to reveal further details.
• Metro Bank: It doesn't offer tracker savings rates for personal banking customers. It's still reviewing variable rates.

Of course, fixed rates savings rates won't change for existing customers.

But in the past, lenders have used base rate cuts an an opportunity to slash the amount of interest paid on new accounts and on variable accounts.

Laura Suter, personal finance analyst at investment platform AJ Bell, said: "Savers who have already seen a swathe of cuts to the interest they get on their cash are likely to be hit further.

"The top rate you can get on an easy-access cash account at the moment is 1.3 per cent and this now looks ripe for another cut following today’s move."

Anna Bowes, co-founder of savings comparison site Savings Champion and Rachel Springall, finance expert at comparison site Moneyfacts.co.uk both expects rates to fall.

Ms Bowes said: "We are certain providers will pass on at least some of the dramatic rate cut to savers."

While Ms Springall added: “It almost seems inevitable at this stage that the base rate reduction could get passed on in full to savers over the next few months."

The average easy-access rate is currently a pitiful 0.56 per cent, according to Moneyfacts, so savers should use this an opportunity to ditch and switch.

Retirees - annuity rates could fall

Pension savers no longer need to take out an annuity, which provides a guaranteed income for life.

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But those thinking of getting one could be hit with a blow as experts say rates could fall as a results of the base rate cut.

Steven Cameron, pensions director at Aegon explained: “The recent fall in the stock market will mean those whose pension is primarily invested in stocks and shares will have seen their pension pot fall in value.

"The reduction in interest rates creates a double whammy as annuity rates are also likely to be cut.