Fridays interest rate reduction should have an impact on most mortgage holders. The Bank of England cut interest rates by a further 1 per cent, which will bring monthly repayments down for those borrowers with tracker mortgages . However, many lenders have not reduced their rates as of yet.

Many borrowers however will not feel the benefit of the rate cuts as those on tracker mortgages will see major banks applying a ‘collar’ to their rates.  This is known as a minimum pay rate which is a part of your mortgage small print and prevents borrowers rates dropping below a certain amount.

Many tracker mortgage collars are initiated at 3 per cent. Some mortgage market experts indicate that as many as 600,000 tracker customers will not benefit from the rate cut at all.

Many lenders have already reduced their standard variable rates following previous rate cuts.  It is not yet known whether they will again lower the SVR to meet the current base rate.

This entry was posted on Saturday, December 6th, 2008 at 6:06 pm and is filed under interest rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.