Mortgage rates cut following base rate drop

13 October 2008

Many mortgage holders reaped immediate benefits on Wednesday as the Bank of England decided on a half-point drop in the base rate to help rejuvenate the weakening economy.

Shortly after the news was announced, a number of mortgage lenders dropped the interest rates on their SVR (standard variable rate) mortgages and fixed-rate mortgages, while the rates of tracker mortgages fell automatically.

The news is a relief to homeowners worried about their mortgage costs potentially rising in the coming months. Many lenders did not respond to the Bank of England’s previous base rate cut, and there was some speculation as to whether mortgage rates would rise in the face of increased economic uncertainty. A spokesperson for Think Money said: “This is the news that would-be and current mortgage holders were waiting for, and despite the continuing falls in house prices, now is still a good time to be a homeowner in many respects.

“The rate cut could also enable lenders to offer more mortgages, which could help to stabilise the housing market and ease a large part of the uncertainty in the economy.”

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