They Say Rates Are Falling: So Why Is My Loan Still the Same?
Every time news of a base rate cut comes out, I calculate it like a card bill and think, "Nice, my interest will go down." But in reality, almost nothing changes—so I looked into it.
For people locked into a fixed rate, a base rate cut has zero effect. I wonder if I'd have been a bit better off with a variable rate, but then I think about what happens when rates rise, and maybe where I am now is right.
Bottom line: this is a story for new borrowers or people with variable-rate loans. It feels a bit hollow to have gotten excited over a headline.
5 answers
This is so true lol. The formula “base rate cut = my interest rate cut” really seems to be something only reporters use.
If you locked in a fixed rate, that was your risk hedge. Even if the interest seems like a waste now, considering how variable rates spiked last year, it was a good choice. I stuck with a variable rate and my interest doubled last year, so I regretted not switching to fixed three times a day. It's true that this is a favorable time for new borrowers, but to switch, you first need to crunch the numbers at the bank counter, starting with the prepayment penalty. The problem starts with the framing that any rate-cut news is automatically a win.