Many homeowners will have been relieved by the Bank of England decision to cut interest rates by 0.25% to 5.5%, but money experts are warning that it ill take some time for the benefits to trickle down to homeowners. The reason is that banks are currently lending money to each other at 6.65%, which is the highest level for almost a decade.
This means that mortgage lenders standard variable rates will not be immediately reduced, though Halifax will be cutting its SVR from 7.75% to 7.5% from January. Other lenders may not be able to follow suit.
Some experts think that further cuts will be necessary sometime early next year in order to make mortgage payments more affordable for homeowners. While homeowners on tracker mortgages will get an immediate boost, but many homeowners with discounted variable rate mortgages may find that their lender doesn’t immediately reduce rates.
According to Katie Tucker at broker John Charcol:
“Longer term it’s good news for all borrowers because bringing the base down means that Libor (the rate at which banks lend to each other) can come down, which will allow lenders to reduce all types of fixed and tracker rates eventually – but there needs to be at least one more rate cut.”
For some though, this interest rate cut will not be enough to get them out of trouble, as many homeowners are already facing rate rises when two year mortgage deals expire next year.
If you are having difficulty keeping up with mortgage payments, and are faced with the threat of repossession, a quick house sale could raise enough money to pay off your debts, while a sell and rent back option could allow you to remain in your current home.