Archive for 2008

The Bank of England has today voted to cut the base rate by 1 percentage point to 2%. The cut brings the base rate to its lowest level since 1951. The second hefty cut in a row (following the 1.5% cut in November) was widely expected, with evidence generally pointing to the economic downturn gathering pace. Response to the move among lenders has been mixed, with the UK’s biggest lender, HBOS, only passing on a quarter of a percent to borrowers on its standard variable rate. The cut follows news from Halifax that house prices fell 2.6% between October and November – their biggest monthly drop since the early 1990s.

Gordon Brown has announced the Homeowners Mortgage Support Scheme. This new scheme will enable households that experience redundancy or other significant loss of income to defer a proportion of their interest payments for up to two years. Banks will have to participate in the scheme in order for the Government to guarantee the deferred interests payments. The 8 largest lenders covering 70% of the mortgage market – HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS, HSBC – have agreed to support the new scheme. The details of the scheme have not yet been finalised but it is thought that the scheme will be open to anybody with a mortgage of less than £400,000 and no more than £16,000 in savings. Applicants would have to provide evidence of genuine economic hardship and have had trouble meeting repayments for 3 months. There are more than 10 million homeowners with mortgages of less than £400,000. It has been suggested that repossessions could hit 75,000 next year, rising from an estimated 45,000 this year. The Chancellor, Alistair Darling, said: “This is real help for homeowners at risk of repossession through no fault of their own. The scheme will give people who face a temporary fall in their income the confidence that they need to rearrange their finances so they can come through a difficult period without losing their home.” Teresa Perchard at the Citizens Advice Bureau said: “To ensure that borrowers are not saddled with unreasonable and excessive payments after the 2 years are up it will be vital that both parties explore all the options available during this period. More also needs to be done to help those on the margins of the mortgage market whose lenders have not signed up to this scheme.“

The Bank of England’s decision today, to cut the interest rate by 1.5%, has been surprising to many people even in the current climate. In the largest cut for 27 years, the Bank reduced the rate to 3% – its lowest rate since 1955. The size of the cut was unexpected by most banks, and they are not yet sure what to do with their mortgage rates. The government however, are pushing mortgage lenders to pass the rate on to borrowers, with the chancellor, Alistair Darling, saying “I think it’s essential that the banks do pass on the benefit of lower interest rates to people.”. Clearly attempting to address the rapidly developing signs of recession, it is hoped that the cut will help strengthen the property market. With Halifax recently announcing that house prices dropped by 2.2% last month, bringing the average price to £168,176, and that the house price to average earnings ratio has fallen below 5.0 for the first time since February 2004, increased affordability should also help stimulate the market.

The Bank of England has today cut the base rate by 0.5% – going from 5.0% to 4.5%. The Monetary Policy Committee held a special meeting today, ahead of the meeting that was planned for Thursday, to agree to the emergency rate cut. The cut was part of an agreement between the Bank of England, the Bank of Canada, the European Central Bank, the US Federal Reserve, Sveriges Riksbank (the Swiss National Bank) and the Bank of Japan to all cut interest rates to help reduce the strain in the financial markets. The cut has been passed on to mortgage holders at some banks and building societies. The last time an emergency rate cut was made was in September 2001.

Today the Bank of England has dropped its base rate by 0.25% to 5.0%. Variable rate mortgage holders will be please to know that the large lenders have promised to pass on the drop to their customers. The cut was generally expected, and is seen as the Bank’s attempt to stave off the credit crunch and encourage growth.