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Fixed rate mortgage holders may be losing out, state officials

March 10, 2009 by admin  
Filed under News, News-Mortgages

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Some industry officials have said that some people that have a fixed rate mortgage loan may be losing out financially because of the way that the base interest rate has been slashed over the past five months by the Bank of England.

The base interest rate stood at 5 percent in October, but has since been slashed to just 1 percent due to a series of rate cuts over the past few months. The current rate is the lowest in the history of the central bank.

When the base interest rate was on its way up in 2006 and 2007 many homeowners decided to opt for a fixed rate loan to protect themselves against further rises. Those that did decide on a three or five year fixed rate loan will not be benefiting from the recent rate cuts, according to officials. For many switching to a variable rate loan at this stage is not viable because of the penalties and fees that may be involved, which many people simply cannot afford.

Officials are recommending that those whose fixed rate mortgage deals are due to come to an end soon start looking around for a suitable variable rate alternative, as the base rate is expected to continue falling and some officials have predicted that it could fall as low as zero over the course of this year. It is thought that over 50 percent of homeowners now have a fixed rate loan, and the homeowners that will be benefiting from the recent rate cuts are the 29 percent that have standard variable rate mortgages.

In the past consumers have often been warned against their lenders’ standard variable rate mortgages, and many have opted for fixed rate deals because they offer increased financial security and stability due to the monthly repayments staying the same. However, with radical rate cuts having taken place it seems that the tables have turned and it is now those with standard variable rate mortgages that will benefit.

Tags: fixed rate mortgages, rate mortgage deals, Fixed interest, fixed rate deals, rate loan, radical rate cuts, base interest rate, standard variable rate

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Comments

One Response to “Fixed rate mortgage holders may be losing out, state officials”
  1. Mortgage Watchdog says:
    March 10, 2009 at 1:28 pm

    Isn’t it always the case that someone, somewhere, and this tends to be large groups of people, are losing out.

    Wouldn’t the world be a greater place if everybody was financially educated to cater for the ps and downs of life after school?

    Are we left to leave school and college without any solid financial tuiton by design or merely by oversight?

    I’m retired from the game now but I always tried to educate people. I just wish others would step up to the plate and educate people about money,instead of seperating them from it.

    Monty

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