Base rates down 0.25% to 5.5%

bristolleedsfan

Aegis wrote: »

At the moment it's fixed, but I'm switching over to a base-rate tracker once my fixed rate ends. The substantial decrease is in comparison to what it would have been if the rates had stayed the same.

nobody knows what morgage providers ( all, not just current provider) will offer them once their fixed rate ends after all providers arent offering 6.70% + fixed rate saving term accounts in order to offer cheap/loss leading morgage deals.

purch

You would have to think that it will become increasingly more difficult for Mortgage lenders to offer Tracker type mortgages tied to Base Rate if the problems of the 'credit crunch' extend further into next year


P.S.
There does appear to be a widespread misunderstanding as to what the BOE base rate actually is, and how it relates to interest rates. The BOE has no power to set or control interest rates in the marketplace, other than the level that it intevenes, or conducts it's own operations within the market. In current market conditions it is difficult for the BOE, or any central Bank to do any more than influence market rates. The current problems are far more to do with the lack of liquidity, rather than the ultimate price of it. The Bank can conduct it's operations at whatever price it chooses, but unless it addresses the liquidity issue, the price of money will stay higher than they want it to be.

baby_boomer

thor wrote: »

The gap between mortgage and saving rates must be way larger than it used to be.

baby_boomer wrote: »

Since 1997 there has been a substantial narrowing, followed by a less substantial widening IMHO - (before I've checked the figures).

thor wrote: »

I've not checked the figures either which is why I was querying it but from memory it is only at around the beginning of the millenium that banks and building socities started to deviate from the nase rate changes. You say that the gap narrowed since 1997 before widening and you must be remembering that mortgage rates shot down over that period but saving rates followed them down too. Whenever there was a 0.25% drop in the boe rate both mortgages and savings rates were cut by the same amount so the gap remained constant. Then around 5 or 6 years ago we began to see the introduction of instituions raising saving rates less then the boe rate rises or cutting by more than the boe rate falls.

This is why I believe the gap to be more than it was in 1997 and savers are the ones who have suffered most. The reason why mortgage payers are getting into trouble now is not because of high rates or hips or stamp duty but because of sky high prices!

I thought this was worth checking against some figures [although these are exclusively building society figures].

Thor is quite right to say that the savings / mortgage rate gap was substantially maintained to 2000. (Averaging between 1.51% and 1.59%.)

Then there was a fall - with a blip upwards in 2002 - which basically saw the building society mortgage/savings gap fall by about 0.3% in the 2004/5 period (down to 1.22% at best). This can be explained as a combination of BSs competing with Northern Rock and reduced cost ratios due to soaring house prices.)

I'm afraid I haven't yet collated the 2006 figures.

So I think I may have mistakenly exaggerated the fall in the savings/mortgage rate "gap", and suspect there is every prospect of it being wiped out in 2008 due to the credit crunch and the lack of competition in the mortgage market from NR.