Alert: Base Rate Reduced to 1%

• News
• Published: 05 Feb 2009 in Money and General

The Bank of England has just slashed its base rate from 1.5% to an unprecedented 1%. In today’s credit-crunched world, the difference between winners and losers – or the smug and the scrunched – is starker than ever.

The smug…

One group of borrowers will be doing cartwheels. Those who took out a mortgage with Cheltenham & Gloucester in mid 2007 got what could turn out to be the deal of a lifetime. They signed up to tracker mortgages which charge the base rate minus 1.01%, meaning that, in theory, they should now be paid interest.
Mortgage holders with HSBC or Lloyds TSB could also be in luck. These lenders have so far led the way in lowering the rates charged to borrowers on variable rate mortgages.

…and the scrunched

If your mortgage is elsewhere, or you’re hoping to get a mortgage, or you’re on a fixed-rate deal, today’s events will likely seem less historic to you. Lenders have become increasingly unwilling to fully pass on rate cuts and the cash available for new mortgages is at record lows, with the pick of the deals reserved for those with a 40% deposit.

Big changes in the savings market

In January 2008 you could find savings accounts paying 6% interest. Today, thanks to base rate cuts, savers will struggle to find an interest rate of 4%. Though the base rate cut will hopefully feed through to many mortgage holders, savers should expect to earn less in interest for the time being.

Confused can help!

Follow this link to compare mortgages

Follow this link to compare savings accounts