One hundred thousand homeowners a month benefit from low interest rates

Posted on 31 October 2009

According to a recent report around one hundred thousand homeowners every month are benefiting from the rock bottom base rate, which has stood at just 0.5 percent since April of this year. The current base rate is the lowest it has ever been in the history of the Bank of England, which spans over three hundred years.

Since mortgage rates plummeted many homeowners have seen their mortgage repayments plunge, leaving them with far more money in their pockets each month.

Many of the borrowers that have benefited from the rock bottom interest rate are those that were tied into two or three year fixed rate mortgages that have recently expired, at which point they have been moved onto the lender’s standard variable rate, which is much lower now than the rate that they were paying on their fixed rate deal. There are still around 42 percent of mortgage holders that are on fixed rates according to the Council of Mortgage Lenders.

The CML also said that mortgages were now at their most affordable since 2004 for those that were able to raise an adequate deposit to get the best rates on mortgage deals. In July of this year borrowers that were taking out mortgages were paying just 12.7 percent of their income towards repayments on the mortgages, whereas in the same period last year they would have been paying 18.1 percent.

The many homeowners that are due to come off fixed rate deals over the next couple of months will most likely allow their mortgage to be switched automatically to the lender’s standard variable rate rather than remortgage, as the SVR is likely to work out much cheaper given the current low base rate.

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