Keep your eye on what your lender does with interest rates
December 27, 2007
Earlier this week the Bank of England announced that interest rates were being cut for the first time in two years, with 0.25% being shaved off the base rate taking it from 5.75% - where it has been stuck since July 2007 – to 5.5%.
In response to this a number of major lenders immediately cut their standard variable rates in line with the Bank of England cut, with new borrowers benefiting right away, and in most cases existing borrowers benefiting from the rate cut from the beginning of January.
Unfortunately those on fixed rate mortgage deals will not benefit from the interest rate cut, because their interest rate is fixed for a set period of time. On the other end of the scale those on base tracker mortgages will benefit right away from the interest rate cut, with their mortgage interest rate tracking the rises and falls in the base rate. With regards to those on standard variable rates with their lenders the situation may vary. Many homeowners are waiting to see whether their lenders will pass on the full interest rate cut, and if so when this will happen.
In cases where the lender fails to pass on the full interest rate cut, or where the lender is extremely slow to act, some mortgage payers may decide to switch, and it is important for homeowners to keep their eye on what their mortgage lender does with interest rates over the next week or two.
The mortgage rate cut came as welcome news to many, with one industry expert stating: ‘Today’s 0.25% cut is a sensible first step towards mitigating these problems in the UK. Further easing of monetary policy will be needed in the short term to avoid GDP falling too far next year.’
Alan Wright
27th December 2007
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