Since August of 2006, which marked the start of a series of five interest rate rises that were to take place in under one year, many homeowners on variable rate mortgages have been struggling to keep on top of their mortgage repayments. Repossession levels have rocketed and the strained financial situation facing most households has seen spending levels fall and the economy take a battering.
The news of the first interest rate cut in two year in December therefore came as welcome news to both struggling homeowners and ailing businesses. However, when a large number of lenders failed to pass on the full 0.25% rate cut to borrowers there was fierce criticism of building societies and banks. It appears that this may have taught lenders a valuable lesson, as the most recent rate cut announcement has seen the vast majority of lenders rush to cut their mortgage interest rates.
The Bank of England announced earlier this week that the base rate would be cut for a second time by a further 0.25%, taking it from 5.5% to 5.25%. According to reports nine out of the ten top mortgage lenders have now announced that they will be passing on the full rate cut to borrowers on variable rate mortgages, with the only exception being Northern Rock.
However, despite this good news for those on variable rate mortgages, experts are warning consumers not to get too relaxed over finances, as the benefits of the rate cut could be easily counteracted by other rising costs such as food, petrol, and energy bills, all of which will put additional strain on household finances.
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