Interest rates fall to a historic 1%

February 5th, 2009

Today the Bank of England cut interest rates by 0.5% taking them to a historic low of just 1%.

Customers fortunate enough to have taken out a tracker mortgage will now be paying even less from next month. The Times reports that 1,500 people who took out a tracker mortgage pegged at 1.01 points below the base rate with Cheltenham & Gloucester will be paying no interest at all.

However, some consumer groups and trade bodies complained that a rate cut will do very little to help the majority of borrowers and penalise savers. An article in The Telegraph estimates that there are some 23 millions savers (some duplication were people hold accounts with more than one society) and only 2.9 million mortgage customers. So the cut will not be welcome by everyone. Especially those people who don’t have an alternative mortgage and who have savings.

Let’s hope that the banks actually pass this saving on to new borrowers. Especially in light of house prices unexpectedly rising in January by 1.9%. If people can afford to borrow again then it may encourage people to join the housing ladder.

Entry Filed under: Finances