The Bank of England has cut Bank Rate by 1%, to 2%, the joint lowest level in its 300 year history. The measure, designed to help the ailing economy, brings the total reduction this year to 3.5%.
As with the 1.5% cut last month, lenders such as Alliance & Leicester, Abbey and C&G, responded by withdrawing many of the best bank rate tracker mortgages at very little notice.
Lloyds TSB (which includes C&G), Bristol & West and HSBC all quickly confirmed they would pass on the full benefit to mortgage customers. Woolwich announced a 1.15% reduction in their standard variable rate (svr), although they had not previously changed following last months bank rate move.
There were mixed fortunes for borrowers with Halifax and Nationwide. Both lenders have decided not to impose unpopular collars attached to many existing tracker mortgages, where the borrower is prevented from getting the full benefit of any reduction in bank rate. The U turns mean that approximately 750,000 customers with tracker deals from the two lenders will see their mortgage repayments fall further from January. However the news wasn’t so good for borrowers on the lenders standard variable rates as Halifax announced a reduction of only 0.25% to 4.75%, and Nationwide a cut of 0.69% to 4.00%.
The Bank of England decision brought further good news as lenders announced new market leading deals. Given the sharp reduction in mortgage rates, it could now pay borrowers to switch lenders even if an early repayment charge applies. Where borrowers are considering this move, it is important to take all fees and charges into account, and L&C’s early repayment calculator will give an indication of whether the move will pay.
The calculator will only give a guide so it’s important that borrowers still seek advice before making the jump. Our advisers are now available, 7 days a week on 0800 373 300 for fee free whole of market advice.