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Thousands poised for 8p-a-month mortgages
amcluesent
Posts: 9,425 Forumite
The 8p-a-month mortgage is set to become a reality for thousands of borrowers next week because of over-generous loan terms offered by banks if the Bank of England cuts base rate from 1.5 per cent to an unprecedented low of 1 per cent next Thursday.
The biggest beneficiaries will be thousands of Cheltenham & Gloucester borrowers who took out a tracker product in July 2007 which charges base rate minus 1.01 per cent. C&G, said that there was a zero floor to the deal and that because its computer systems could not cope with zero, it would be temporarily charging 0.001 per cent if base rate is cut to 1per cent.
Economists also forecast that interest rates could fall to as low as 0.25 per cent or 0 per cent before April as the Bank of England's rate setting committee battles to try to boost the economy in the face of a deep and prolonged recession.
The biggest beneficiaries will be thousands of Cheltenham & Gloucester borrowers who took out a tracker product in July 2007 which charges base rate minus 1.01 per cent. C&G, said that there was a zero floor to the deal and that because its computer systems could not cope with zero, it would be temporarily charging 0.001 per cent if base rate is cut to 1per cent.
Economists also forecast that interest rates could fall to as low as 0.25 per cent or 0 per cent before April as the Bank of England's rate setting committee battles to try to boost the economy in the face of a deep and prolonged recession.
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Comments
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now is the time to keep paying what you were paying at this time last year - you won't miss the money if you DD it into a avings account on a monthly basis on the same date as your mortgage payment goes out.;)
Opportunity to save a LOT of money while still repaying your mortgage.:money:Member of the first Mortgage Free in 3 challenge, no.19
Balance 19th April '07 = minus £27,640
Balance 1st November '09 = mortgage paid off with £1903 left over. Title deeds are now ours.0 -
save??? why not overpay and decrease the capital faster with rates so lowbubblesmoney :hello:0
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bubblesmoney wrote: »save??? why not overpay and decrease the capital faster with rates so low
I'm putting the money I would have been paying in interest into a 7% regular saver every month. As I'm currently paying 2.5% on my mortgage (tracker - 1% above base rate) it seems a better option to do this for 12 months. When the reg saver matures I'll pay that amount inc interest off the mortgage.Now proud Mumto3 :j0 -
I'm afraid I spent mine over the last few months, it really helped with Christmas, but I will be overpaying after next month.I’m a Forum Ambassador and I support the Forum Team on the Old style MoneySaving boards.
If you need any help on these boards, please let me know.
Please report any posts you spot that are in breach of the Forum Rules by using the Report button, or by e-mailing forumteam@moneysavingexpert.com.
All views are my own and not of MoneySavingExpert.com0 -
Hold on a minute, where do they get the 8p figure from? What they mean is, you repay the capital without any interest, as interest is c.0%. But how can the capital be worth only 8p? If you're paying 8p a month on a £150k home, that would mean you took out a mortgage over 62,000 years!?
Or is 8p the interest?0 -
Its Interest...
"For borrowers on a £100,000 interest-only mortgage that would translate into a monthly interest payment of 8p. Those on repayment mortgages will continue to pay more as principal repayments are included in their monthly bills."
£100,000 x 0.001% = £1, per year.
Divided by 12, Monthly = £0.08333
Rounded = 8p a month.
Not going to bother with working it out for Daily interest...!0 -
Most trackers that are under the BOE rate are short term AFAIK. So,may run out while the rates are low and suddenly jump to SVR or new deal. Some with perfect timing will get to see the low rates right out.
Most lifetime trackers, I believe, are +BOE rate and common amounts seem to be +0.25% to +1%.
If BOE rates fall to zero, most trackers won't be paying as low as 8p interest but closer to 0.5% to 1%0 -
Like mumto3, we put our overpayments into a fixed rate higher interest rate savings account that is earning a much higher rate than we pay on our mortgage. We have a +0.49% lifetime tracker.
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings is where MArtin xplains how this works - once upon a time (ok, so about a year ago) it normally made sense to overpay the mortgage, but with mortgage rates being so low it makes sense for us to save.
If, however, you're on a fixed rate product, say it's 5.5%, then that will be hard to beat and you'd be better off paying the money into your mortgage.
Either way it's better to hide the money away than get used to spending it - then it will feel awful if/when interest rates go back to more 'normal' levels.Member of the first Mortgage Free in 3 challenge, no.19
Balance 19th April '07 = minus £27,640
Balance 1st November '09 = mortgage paid off with £1903 left over. Title deeds are now ours.0 -
It will be a big shock for people - especially if they rise as fast as they have fallen. I am praying that we keep our jobs and that I can keep up my overpayments for twelve months using this opportunity. That will leave us with 2/3 of the original debt and make a future 15% equal to 10%. I am really concerned we will see spiky interest rates.0
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In the current climate it is safer to make sure you have a large savings pot, to help you through any low income times, rather than overpay your mortgage.
I worked out that overpaying my mortgage by £400 per month over a whole year would only reduce future repayments by £9 a month. Big deal. Whereas saving £400 a month would mean a pot of nearly £5,000.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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