The value of property in Belgravia and other areas of prime central London could rise after the Bank of England opened the door to lower cost mortgages by cutting its base rate to 0.25%.
The decision to cut interest rates to 0.25% was approved unanimously by the nine members of the Monetary Policy Committee and is the first change in interest rates since March 2009.
After announcing the base rate would fall from its previous record low of 0.5%, BoE governor Mark Carney said there was scope to cut the interest rate further.
He said that majority of MPC members backed further cutting the interest rate if subsequent data shows the economy is deteriorating.
Mr Carney said lenders have “no excuse” not to pass on the lower borrowing costs to customers and will be charged a penalty if they do not lend.
He added: “The MPC is determined that the stimulus the economy needs does not get diluted as it passes through the financial system.”
The 1.5 million borrowers with mortgages that track the base rate will see their monthly repayments fall, probably from the start of September.
For a homeowner on the average variable mortgage rate of 2.86% and a mortgage of £1m, a reduction in line with the base rate will mean monthly repayments falling by £128 to £4,542.
The MPC meeting on Thursday 4 August was the last before it moves to only meeting eight times a year, meaning that it is not scheduled to meet again until 3 November.
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