January 19, 2009
Tracker Mortgages - 4m Borrowers See Payments Fall
Around 4m borrowers with tracker mortgages will hopefully see their payments fall this month as the drop of interest rates from December. It is estimated however that mortgage lenders are still raking in £120m a month because of excessive rates charged on new mortgage products.
Last months 0.5% cut shaved £48/mth off a £200,000 tracker mortgage. Some lucky property investors have rates around 1% below base rate will see their interest rate charged to be 0.5% - if the Bank of England reduced rates further by say a further 0.5%, technically borrowers will not have any interest to pay on their loans.
New borrowers are not so lucky, lenders are still wanting to increase their margins on new loans. The average new 2-year tracker stood at 4.51%, whilst libor is currently running at 2.5%. The best rate currently available is from HBOS at 3.95% for those who have a deposit of 40% or more.
Could rates fall BELOW 0% with lenders? If interest rates continue to fall to say 1% or less those with discounted trackers could see their intrest rates cut to zero.
Ray Boulger of Charcoals stated that "Fixed Rate mortgages still look expensive in todays market"
