Andy Adams is an experieced UK writer
From January 1st borrowers will see an improvement in their variable rate mortgages, this is thanks to Bank of England’s rate-setting committee recently reduced the base rate for mortgages by a quarter percent to 5.5%.
This drop means that the major mortgage lenders are set to possibly cut the monthly repayments for their customers, whilst it is not likely to be a substantial drop it is seen as a step in the right direction for many mortgage borrowers and makes the prospect of getting a mortgage more attractive for the first time buyers who have previously been put off by rising house prices.
The reduction in base rates has meant that some major lenders have passed these benefits to borrowers in the form of up to £20 off monthly repayments on £100k mortgages. Halifax’s standard rate has been brought down to 7.5% from 7.75% and Nationwide dipping below 7% by dropping from 7.24% to 6.99%, whilst this relates to their Base Mortgage Rate it will also apply to Tracker Mortgages too.
First Direct is to be the lowest with 6.50% making it the lowest of any Bank or Building society, this will also take effect immediately rather than the 1st of January like other mortgage lenders.
With these reductions it makes for lessening the risk of “payment shock”, where borrowers suddenly received a very large increase in payments on their mortgage. The only problem is that Fixed Rate borrowers are facing these kinds of increases; this is due to them being governed by “swap rates”, the rates at which banks lend to each other rather than the Bank of England’s base rate.
Peter Bolton King, chief executive of the National Association of Estate Agents welcomed the cuts saying “This is just what the market needed. There has been considerable doom and gloom lately as we have had to endure the fallout from some significant national and international events. This latest rate decrease will at least go some way towards repairing the damage done. I'm hopeful this will be the turning point in consumer confidence that will set the market back on track again.”
So in summary this change means that first time buyers are to benefit by the burden of costs involved being lifted, it also means good news for people nearing the end of their fixed rate mortgages.
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