October 2008

Lenders Withdrawing their Tracker Rate Mortgages
10 October 2008

In the wake of the announcement that The Bank of England (BOE) cut its rate by 0.5% many lenders have either withdrawn their tracker rate mortgages or are considering such moves. Many have reported surges in demand for these products being the main driving force. It must also be considered that although the BOE cut its rate, many lenders borrow on LIBOR rate which has not seen such reductions, meaning they are unable to pass on these cuts immediately without losing out themselves.

Base Rate Reduced
9 October 2008

The Bank of England today reduced its base rate by 0.5 percentage points from 5% to 4.5%. In an unprecedented move, several other central banks have also cut rates, which will hopefully assist in stabilising the worldwide economy.

Several mortgage lenders have already confirmed that they will be passing this rate reduction onto customers by reducing their Standard Variable Rates.

This is great news for those currently with mortgages that track the Bank of England base rate who should see a benefit by the following month. Also, those of you who have just come out of a fixed rate and are now sitting on your lenders standard variable rate will enjoy a saving.

So lets take a look at some figures. If you have a £150,000 interest only mortgage that tracks the base rate, the half a percent decrease in your interest rate will save you £62.50 per month, that’s £750 per year. This should help with the rising fuel bills you’ll no doubt be noticing this winter.

So how should this affect your plans with a new mortgage? Is it a good time to fix? Well there is no simple answer to that question, as it will depend on your circumstances. But as a guide I would say fixing now isn’t the best strategy. With inflation looking like it’s out of the way rates will need to drop considerably to stabilise the economy. As such, fixing into a rate now could lead to you missing out on the benefits of future rate reductions.

For a more detailed look at the economy and expectations of interest rates take a look at our article

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If you have a question about your mortgage and wish to speak in confidence to an adviser, please call 0800 0112825 or email info@wwfp.net

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