Lenders cut mortgage rates in wake of interest rate cut

Permalink: Lenders cut mortgage rates in wake of interest rate cut
by Kay Murchie

Following yesterday’s 0.5% cut in UK interest rates, some mortgage lenders have responded and said they plan to cut their standard variable rate by half a percentage point.

Cheltenham & Gloucester (the home-loans branch of Lloyds TSB), First Direct (part of HSBC), Halifax, Lloyds TSB, NatWest, Royal Bank of Scotland and Woolwich have all said they will reduce their standard variable rates (SVR).

From 1 November, Halifax said it will be reducing its SVR from 7% to 6.5% while Cheltenham & Gloucester is to cut its SVR by half a percentage point to 6.5%, also on 1 November.

Approximately 7% of mortgage holders have a SVR mortgage, however, the 11.7 million UK householders who have a tracker mortgage will benefit the most.

Michael Coogan of the Council of Mortgage Lenders said the difficult times are not over yet in the housing market but this action from lenders indicates a slight improvement.

Despite the good news, Adrian Coles, director general of the Building Societies Association, advises any borrowers who think they may encounter difficulties in repaying their mortgage should contact their lender as soon as possible.

A recent report from the British Chambers of Commerce forecasts that the number of people unemployed will increase by between 300,000 and 350,000 over the next couple of years, which would take the unemployment total to over the two million mark.

Problems with mortgage repayments are expected to become more commonplace if homeowners lose their jobs.

In related news, the Halifax has today reported that UK house prices experienced a fall of 1.3% in September, dealing a blow to those already in or faced with the prospect of negative equity.

According to the Halifax, a further £2,000 has been wiped off the value of an average home, taking the average cost to £172,108, similar to the average price of a UK home in January 2006.

This is the eight consecutive month that house prices have fallen and the lender said the decline meant the annual fall now stood at 12.4%. However, when comparing prices in just September with the same month in 2007, the fall in prices reaches 13.3% - the highest fall recorded by the Halifax since it started collecting data in 1987.