Lenders Swiftly Pass on Interest Rate Cuts to Mortgages

Strategic Insights -

Millions of homeowners have been greeted with joy as several lenders rapidly implemented the Bank of England's cut in interest rates to their standard variable rates, despite the economy still showing signs of struggle. Halifax, Nationwide, and Skipton Building Society made the adjustments within minutes of the Bank's announcement. Economists predict that rates will continue to fall, potentially reaching 0.5pc or even lower later this year and hovering around zero for much of 2010 until recovery is seen. Martin Gahbauer, a senior economist at Nationwide, notes that the Monetary Policy Committee (MPC) will continue to cut rates to stimulate the economy, which may have a delayed effect of one to two years.

Key Takeaways:

  • Several lenders, including Halifax, Nationwide, and Skipton Building Society, have quickly implemented the Bank of England's interest rate cut to their standard variable rates.
  • Economists predict that rates will continue to fall, potentially reaching 0.5pc or even lower later this year.
  • A senior economist at Nationwide, Martin Gahbauer, believes the Monetary Policy Committee (MPC) will continue to cut rates to stimulate the economy, which may take one to two years to be fully effective.
  • Mortgage brokers suggest that borrowers consider taking out fixed-rate mortgages now, with several lenders offering rates below 5pc, such as HSBC's two-year fixed mortgage at 2.99pc.
  • Melanie Bien, a director at Savills Private Finance, notes that there are excellent fixed-rate products available for borrowers who meet lender criteria, with rates under 4.5pc being considered a good deal in any climate.
  • Ray Boulger, a mortgage expert at John Charcol, advises borrowers with a loan-to-value (LTV) of around 75pc to consider fixing now, as further house price falls may elevate their LTV above 80pc, where rates are less attractive.

Statistics:

  • 300-year low: Current interest rates.
  • 0.5pc: Predicted interest rate in the coming year.
  • 2.99pc: HSBC's two-year fixed mortgage rate.
  • 4.19pc: Mark Chick's three-year fixed-rate mortgage from Halifax at 60pc loan-to-value (LTV).
  • 3.49pc: Royal Bank of Scotland's two-year fixed rate for purchases with a pounds 799 fee up to 75pc LTV.
  • 5.89pc: Britannia's 10-year fixed rate.
  • 5.69pc: Cheltenham & Gloucester's two-year fixed rate up to 90pc LTV.

Sources:

  • Martin Gahbauer, senior economist at Nationwide.
  • Melanie Bien, director at Savills Private Finance.
  • Ray Boulger, mortgage expert at John Charcol.
  • David Hollingworth, spokesman for London & Country Mortgages.
  • Mark Chick, IT technician and borrower.
  • Royal Bank of Scotland.
  • Halifax.
  • Nationwide.
  • Skipton Building Society.
  • HSBC.
  • Britannia.
  • Cheltenham & Gloucester.
  • Telegraph.co.uk.