Mortgage repayment reductions not going to High Street
July 20, 2009
Over the past eight months or so many homeowners in the UK with variable rate mortgages have seen their monthly mortgage repayments plummet, with the base interest rate plunging to just a tenth of the level that it was at in October of last year.
Last October the base interest rate stood at 5 percent, but by April of this year, through a series of dramatic base rate cuts, it had fallen to a tenth of this level, standing at just 0.5 percent, where it has remained ever since.
For many homeowners this dramatic drop in the base rate has meant big savings on their monthly repayments, which have fallen in line with the base rate fall.
However, whilst the government may have been hoping that consumers would spend this extra cash on the High Street in order to get the economy moving again, many industry officials have said that this is simply not the case.
One industry expert commented on how some families had seen an improvement in their financial situations over the eight month period despite the ongoing recession, stating: “Even though we’re still in recession, many UK householders who have not been hit by unemployment have experienced a dramatic upturn in their monthly budgets over the last year.”
However, he added that the extra money that households have as a result of falling mortgage repayments was largely going on bolstering their savings accounts, overpaying on their mortgages, and paying off their debts such as credit cards, rather than being spent on luxuries and non-necessities on the High Street.
He added that “many consumers are using their increased monthly spending power to repair savings balances and pay off credit cards and other debts. These gains are certainly not being spent freely on the high street.”
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