Rate freeze pinches homeowners over mortgages
Homeowners that were banking on the cost of their existing mortgage repayments to dip in 2008 are facing a setback. The Bank of England has decided to leave rates unchanged at 5.5 per cent. The blow comes just after the realization that many lenders have still to pass on rate cut of December to its variable rate mortgages.
Jonathan Cornell, MD at the UK mortgage broker Hamptons International Mortgages, commented that the decision of the Bank of England to hold the base rate this month, makes previous month’s decrease look nothing more than a goodwill gesture. According to Cornell, what will really upset and hurt mortgage borrowers is the persistent failure of mortgage lenders to pass on previous month’s fall in their mortgage repayments.
While borrowers on a mortgage that tracks the BoE base rate should have felt the impact of previous month’s cut almost instantly, those sitting on SVR rate of their mortgage lender will not be so thrilled and will need to wait for LIBOR rates to begin to take a similar fall before they get any respite.
Many lenders have opted to stick by their guns in spite of Gordon Brown stating that they (lenders) had a ‘duty’ to pass on cuts in interest rate. But despite his reminder, top mortgage lenders state that further reductions would not necessarily be passed to borrowers.