The Effect of the Base Rate Cut on Borrowers

November 8, 2008 by Brendan O'Neill

News

Earlier this week, many were surprised as the Bank of England’s Monetary Policy Committee cut the base interest rate to just 3 per cent, from the existing 4.5 per cent. Although experts had predicted a large rate cut of as much as 1 per cent, none had predicted such a huge cut.

Existing borrowers with a tracker mortgage will be looking forward to a 1.5 per cent reduction in their mortgage, which will have a great impact on their monthly repayments.

The below mortgage lenders have already removed their tracker mortgages for new borrowers, however, according to Moneysupermarket.com, there are still some good tracker mortgages to be found.

Skipton Building Society
Woolwich
Cheltenham & Gloucester
Lloyds TSB
The Mortgage Works (a subsidiary of Nationwide)
Alliance & Leicester
Nationwide
Abbey

This week, the Nationwide and the Abbey both announced that they are not only removing their tracker mortgages, but have no intentions to replace them at all. Others may still reinstate their tracker mortgages, however, new borrowers are likely to find that the margin is significantly higher than the base interest rate from the Bank of England.

Lloyds TSB and Cheltenham & Gloucester have passed on the full 1.5 per cent discount, which will take effect from the 1st December, however, not all mortgage lenders are expected to pass on the entire cut.

For those borrowers looking for a fixed rate mortgage, according to the experts, the rates are likely to reduce over the next few weeks so the general concensus is to wait a few weeks to take out a mortgage in order to get a cheaper deal.