Rate cut could benefit many homeowners

The latest interest rate cut, which was announced after the February 2008 Monetary Policy Committee meeting, could benefit many homeowners according to recent reports. This comes after nine out of the ten top mortgage providers in the UK announced that they would be passing on the full 0.25% rate cut to consumers. Many lenders rushed to announce their intention of passing on the full rate cut following the Bank of England’s announcement.

Customers that are on variable rate mortgages with 90% of the top ten mortgage lenders are therefore set to benefit from the 0.25% interest rate cut. Those on fixed rate mortgages will not be affected. Northern Rock was the one bank that did not rush to state that it would be passing on the rate cut following the Bank of England announcement. However, the pledge from the majority of banks to pass on the rate cut will come as welcome news to many struggling homeowners.

Over recent months many have struggled to control their strained finances, with interest rate cuts being counteracted by rising food costs, higher petrol costs, and increases in energy costs. One industry official stated: ‘The rate cut could still be too little, too late, for some. People are currently paying out 35% of their take-home pay on mortgage repayments, and ten million consumers already feel that their current level of overall debt is unmanageable.’

It is thought that one of the reasons behind the majority of top lenders rushing to pass on the 0.25% cut to borrowers is the intense fire that they came under after the December cut, when around 20% of lenders failed to pass on the full rate cut to borrowers.