The Bank of England yesterday agreed to make everyone on a tracker mortgage richer by reducing the base rates again. This time the base rate was reduced by 0.5% bringing it to an all time low of 0.5%.
This rate cut will benefit everyone on a tracker or discount mortgage which tracks the bank of england base rate. Research show that only about one quarter of all mortgage holders will benefit from the rate cut. I guess I fall into that category. I secured a deal which is 0.95% below the base rate, which should mean that the bank will be paying me interest on my loan. Well I wont hold my breath on that!
Most investors who bought in the last two years will have bought using tracker mortgages or fixed rate mortgages that will be coming of the fixed rate now, or very soon. This is good news too as the mortgages will switch to the lenders SVR (standard variable rate) which is usually base rate plus 2% which will now be a stupidly low 2.5%. So as capital values tumble at least investors will have much improved cashflow.
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I know someone who still has 2.5 years left on a fixed rate, which he fixed 1.5 years ago.
Unfortunatley these people aren’t noticing any great deals at the moment.
It’ll be a few more months before the positive impact of this cut kicks in but when it does the economy should start making good progress.