Predicted rate cuts could reduce annual repayments by thousands
October 10, 2008
According to a recent report homeowners paying their mortgages could find that their repayments fall by a couple of thousand pounds or more if the Bank of England cuts the base rate several times over the next year, as it is expected to do. A number of industry officials have predicted that the base rate will be cut a number of times over the coming twelve months, and for some people this could mean huge savings on repayments depending on the size of the mortgage and the interest rate that they are paying.
Officials have said that a rate cut of just 1% over the coming year could result in an annual saving of about £2000 on repayments for homeowners with a mortgage of £250,000. The typical mortgage is around £138,000 and this would mean a saving of £1300 a year on repayments if the base rate comes down to 4% over the next year, as many have predicted that it will. Some officials have predicted that the base rate could fall even further and could hit 3.5% by the middle of next year.
A number of lenders had been dropping their mortgage interest rates over the past few weeks, with one analyst stating: ‘The cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months. We are now seeing some relief for borrowers who are looking for a new deal.’
However, some have now increased their rates again amidst volatile financial conditions.
The cut in annual repayments will be based on lenders applying any Bank of England base rate cuts on their own mortgage products, which many can be slow to do.
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