UK public beginning to feel the positive (and negative) effects of interest rate cuts in their mortgages

May 7th, 2009 by admin | Filed under Daily News, Mortgages, Recession.

There were no shortage of cynics around when the Bank of England announced that they would be cutting interest rates to next to nothing and that the savings would be passed on to the UK public, and especially those who were suffering from paying excessive interest rates on their mortgages.

Well the news is that these savings are beginning to filter through, and the reduction in their monthly mortgage and overdraft payments are being welcomed with both hands by most home owners in the United Kingdom.

Yet there are a group of families, around 20, 000 in number who have found themselves in a situation where, due to some short sighted marketing strategies on the part of the UK mortgage banks, have found themselves in a situation where their mortgage payments have been reduced to next to nothing, and in even some extreme cases, where they are actually paying negative interest.

These are people who had the good luck or were wise enough to take their mortgage on an adjustable- rate basis against the current bank rate These mortgages were on offer during the height of the boom years, and didn’t seem attractive to too many people as the interest rates were much higher at the time. Today, with interest rates at 0.5%, it’s the nearest thing to winning the pools that you will find these days for the fortunate few who were convinced to take this track.

Families who took out 25 year mortgages or refinanced an existing mortgage were offered a rate of around half a percent below the current central bank rate from most of the major building societies. The interest rate was then around five percent annually and the offer were for the first three years.

Nowadays families who took advantage of the offer are paying around 0.14 percent annually, and will be doing so at least for the next year to eighteen months. How could ask for a better breathing space than this one during times of financial frugality!