Lenders cut fixed rate mortgage rates

According to industry reports a number of lenders have slashed the rates on their fixed rate mortgage offerings even though the Bank of England decided to keep the base interest rate on hold again this month at its record low of 0.5 percent. A number of building societies and banks have cut the rates on their fixed rate deals.

High Street banking giant HSBC recently launched its lowest ever five year fixed rate deal, and last week saw Coventry Building Society and Nationwide Building Society reduce their fixed rate deals. One industry expert said that the reason why lenders were slashing their fixed rates even though the base rate had remained static was because they wanted to try and entice people off going for low standard variable rates. With banks already struggling the situation is being made worse by people opting for low standard variable rates, and this has led the banks to start taking action.

She said that many people that had come off special fixed rate deals had then moved onto standard variable rates, and with the base rate being so low this had been their cheapest option. This has resulted in lenders struggling, and many are now working on the hope that by cutting their fixed rate deals they can tempt people into remortgaging and taking out a fixed rate deal rather than a standard variable rate one.

Financial expert Michelle Slade stated: ‘Millions of customers who have come off short-term fixed-rate and tracker deals in recent years have gone on to their lender’s standard variable rate as it has been cheaper than fixing again. For example, Nationwide’s base mortgage rate is just 2.5%.’ She added: ‘The new fixed rates are certainly mouth-watering and could be worth grabbing for some borrowers.’

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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. Read more

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Moving mortgage could save money

Mortgage-payers are often forking out over the odds for their home loans and should consider re-mortgaging, according to one industry publication.

Moneywise magazine says a general apathy about changing providers, leaves people, in some cases, paying hundreds of pounds more than need be the case.

Rachel Williams, editor of Moneywise, said: “If you are paying your lender’s standard variable rate, you could be paying more than two per cent more than you need to.”

There are fears that, in the light of the recent Northern Rock debacle, homeowners are wary of changing providers, but Ms Williams said that savings could still be had even if they keep the same lender and switch product instead.

“The easiest way is remortgaging with your existing lender, because then it’s just a case of signing a few forms and being transferred,” she said.

Various factors would determine the viability of switching, such as arrangement fees, early redemption charges and tie-in periods, but even so significant savings can be had.

On an interest only £100,000 mortgage, at a rate of 7.75 per cent (SVR) comma you could save £166 per month if you switched to a scheme on 5.75per cent.

Various products are available including standard variable, fixed, and tracker – which typically tracks the Bank of England base rate.

Tags: bank of england base rate, variable rate mortgage, publication, easiest way, Mortgage-payers, redemption charges, variable, Mortgage loan