Interest rate cut good for borrowers

2:20pm Friday 5th December 2008

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INTEREST rates are at their lowest since 1951 after the Bank of England cut the base rate to 2 per cent.

The Government hopes it will kickstart the lending process and in particular boost mortgage lending.

But Anthony Eden, from Eden Independent Financial Services, in Rayleigh High Street, warns it is only good news if lenders pass on the full cut to customers.

While some banks, like Lloyds TSB, are passing it on, others such as Standard Life bank are not yet and so it can review the situation.

Mr Eden said: “A small minority of mortgage customers are on standard variable rates and will benefit.

“Those on fixed rate are unaffected and the people who will benefit most are those on a tracker rate. But people should check if they are on collar deals where if the rate drops below 3 per cent the provider is not obligated to pass it on.

“Overall it has to be positive and it may encourage the banks to start lending among themselves which will increase competition in the mortgage market.”

The main advice is to shop around for the best savings and mortgage deals and seek independent advice.

However, the people who will be hardest hit by the latest cut are pensioners who rely on savings with banks or building societies.

Mr Eden said: “For those already retired they will be affected in the short term.

“The interest on their cash savings will be reduced dramatically.

“Now really is the time to make the most of the low markets and shop around.”