Some property buyers are waiting with baited for Thursday to see if their mortgages fall to 8 pence a week. They will do so if the Bank of England cuts interest rates to 1 per cent. The mortgagees are those Cheltenham&Gloucester customers who took out a deal at 1.01 percentage points below the Bank’s base rate.
They will actually be paying no interest whatsoever – but for reasons of bureaucracy they will still have to make token payments of 8p on a £100,000 mortgage. The money will be subsequently refunded.
The freebie mortgages will apply only to those who took out interest-only tracker loans. People with repayment mortgages will pay about £333 a month on a £100,000 loan.
The majority of other tracker mortgages will fall but interest rates on new products which are on offer are, in the main, one and sometimes two percentage points above base rate. Some mortgagees have been dismayed by discovering in the small print that their mortgages have ‘collars’ which prevent them from falling below a certain level.
If the BoE cuts interest rates again it will be the fifth cut in five months. It’s good news for many mortgagees – even though some lenders are still ignoring the government’s insistence that the cuts must be passed on in full to their customers.
But another Bank cut will further alarm savers who have seen interest rates plummet on savings accounts. Some accounts are now paying a miserly 4p on deposits of £5000. It’s causing big problems for pensioners many of whom used to top up their pensions with the interest from money in savings accounts.
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