Is it wise to remortgage to a base rate tracker?
January 6, 2008
A number of experts are suggesting that homeowners and new property purchasers in the UK may be better off now looking at a base rate tracker mortgage in light of the predictions of further base rate cuts over the coming year. The Bank of England has already cut the interest rate by 0.25% earlier this month, taking the base rate from 5.75% to 5.5%. Those on base rate tracker mortgages will enjoy the benefits of this rate cut right away, and with another two or three cuts expected in the coming year consumers with this type of mortgage could benefit further.
Following the Bank of England’s announcement that interest rates were being cut earlier in the month a number of banks responded right away by announcing that they were cutting the interest rate on their variable rate mortgages in line with the base rate cut. However, a number of other lenders have stated that they are reviewing their rates and have as yet failed to pass on the rate cut to customers.
Industry officials state that some banks are using these delay tactics to make the most of the rate cut and recoup money from losses incurred because of the global credit crunch. One industry official stated: “Many homeowners will be left disappointed this Christmas … lenders are looking to retrieve some profit margin so they hit their end of year targets and are reluctant to pass on the full benefit of the rate reduction to borrowers.”
Around 50% of lenders are said to have failed to pass on the base rate cut to borrowers, and one industry expert states that this means borrowers will be paying around £10 million per month extra. Many borrowers may not look at remortgaging as a result of some lenders’ refusal to cut their standard variable rate in line with the base rate cut.
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