Homeowners should keep their eye on interest rates
July 7, 2008
Following the recent cut in interest rates, announced earlier this month by the Bank of England following December’s Monetary Policy Committee meeting, homeowners with variable rate mortgages are being advised to keep an eye on the interest rate from their lender to ensure that they benefit from the interest rate cut. The interest rate was cur earlier this month from 5.75% to 5.5% after the Bank of England announced a quarter point cut.
After the announcement was made a number of major lenders passed on the full interest rate cut to borrowers right away, with several banks cutting their standard variable rate by 0.5% for new borrowers right away, and some stating that existing borrowers would see their rates comes down by a quarter point in January. However, some banks are still reviewing their rates, and some consumers may find that their banks do not pass the full rate cut on.
Those on base rate tracker mortgages will also benefit from the interest rate cut, but those on fixed rate deals will not benefit from the cut because their interest rates are fixed for a specified period. Those on standard variable rates may or may not see their rates cut depending on the lender, and some may get the full benefit of the cut whereas others may only receive part of the reduction. This is something that homeowners on variable rates need to keep their eyes on.
The interest rate cut came as welcome news to homeowners and a number of industry officials. Following the announcement from the Bank of England one industry official stated: ‘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.’
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