Archive for November, 2008

Many of the UK’s major mortgage lenders have been reacting to the recent 1.5% Bank of England rate cut.  With rates now at there lowest for 53 years and recent confirmation from the Bank of England that they are prepared to cut rates to zero to save the economy, lenders have been withdrawing and relaunching new tracker deals.

Tracker deals are directly linked to the Bank rate and recent figures show that tracker mortgages have been consistently growing in popularity.  Whilst most of the tracker deals still offer good value, the recently relaunched deals have increased the margin between the lenders rate and the bank rate.

Many of the better deals now have the additional restriction of larger deposits being required from borrowers, typically 25%.  Some lenders have also incorporated a ‘collar’ which means that should the bank rate fall below a certain level, the cuts will not be passed on to the borrower.  The major lenders appear to have positioned this ‘collar’ around 3% but as the lenders rates are normally around 2% above bank rate, this still represents good value.  Borrowers are still advised to be careful regarding collars.

Whilst the major lenders in Northern Ireland were quick to respond to the cuts, others have yet to announce if they will reduce there standard variable rate in accordance with the rate reduction.  The Governor of the Bank of England has confirmed that they are prepared to cut the rate to “whatever level is necessary” to boost confidence and stave off a long and deep recession.  This level of commitment from the Bank of England and the governments recent talks with bank executives, should encourage those stragglers to follow suit.

Bank executives have today been summoned to Downing Street to meet with Chancellor Alistair Darling where he has set clear expectations that they pass on the recent 1.5% rate cut to their customers.

The ‘big four’ banks in Northern Ireland were quick to follow with rate cuts following yesterdays Bank of England announcement, however many mainland UK banks have been criticised for dragging their heels.

The cut has been welcomed by many in Northern Ireland, hoping this latest move by the Bank’s Monetary Policy Committee.  Chief executive of the Northern Ireland Trade Association Glyn Roberts, said it was a “bold move” and that he was hopefull that it would “kick start the economy both in Northern Ireland and the rest of the UK”.

Bank of Ireland, The First Trust Bank, The Northern Bank and Ulster Bank have all announced that they would be cutting their rates either with immediate effect or over the coming weeks.

Amongst all the recent reports on the economic downturn, it is hoped these measures will assist in restoring consumer confidence and ease the burden on consumers and businesses alike.