Rate Cut May Not Result in Mortgage Savings

Posted 2008-01-7

Homeowners may not see savings on their mortgage payments in spite of additional cuts in the base interest rate this year, says one expert.

 

According to David Kuo, head of personal finance for the Motley Fool, the Monetary Policy Committee’s decision to keep the base rate unchanged may or may not have an impact on mortgage rates. That relationship has not been firmly established.

 

Lenders have been encouraged to pass December’s rate cut on to borrowers by Chancellor Darling.   Mr. Kuo warns, however, that mortgage loan providers are not required to pass savings on to borrowers, and given the current economic climate, many may choose not to do so.

 

At the moment, many lenders are focusing on returning their business to better health.

 

While experts predict that the Bank of England may institute further cuts in answer to the current economic slowdown, homeowners will probably not feel any benefit from those cuts.

 

There is a strong possibility that personal insolvencies will increase this year, according to James Falla of Thomas Charles & Co.

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