Interest rate cut eases burden for property owners

Interest rate cut eases burden for property owners

Millions of borrowers breathed a sigh of relief this week after the Bank of England cut interest rates from 5.5% to 5.25%.

Halifax, Nationwide, Abbey, Lloyds TSB, Cheltenham & Gloucester, HSBC, the Woolwich and Royal Bank of Scotland/NatWest were among those quick to confirm they were passing on the full 0.25% reduction to mortgage-holders on standard variable rates.

Those on base rate tracker deals will, of course, benefit in full, while the millions of people on fixed-rate deals will see no change in their payments.

So, what is the advice for those looking to take out a home loan? Ray Boulger at mortgage broker John Charcol says some lenders have been upping the tracker rates they offer to new customers, which is not good news. He adds that the best fixed-rate deals look reasonably attractive compared with trackers, despite expectations of at least one more base rate cut soon.

However, "flexibility remains paramount in an uncertain market". Therefore, a tracker with no early redemption penalties might be a good choice in the current market, as it would give borrowers the option of switching to a fixed rate later, when such deals may offer even better value than now.

At the time of writing, the Cumberland and Yorkshire building societies have two-year fixes at 5.08% and 5.09% respectively.

We will have to wait and see what is happening to savings accounts, as many of the big players have yet to declare their intentions.

National.....continued below

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Savings & Investments confirmed its Direct Isa rate falls from 6.05% to 5.8%. The new rate took effect on Thursday. Icelandic bank Kaupthing Edge, which recently launched an online instant access account paying 6.31% gross (6.5% AER), says it is keeping this rate. The account must be opened online and the minimum investment is £1,000.

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