Monday 10th December 2007
Mortgage holders could finally have reason to celebrate following last weeks decision by the Bank of England to lower the base rate to 5.5 per cent.
The nine members of the monetary policy committee (MPC) voted on Thursday to reduce the interest rate in response to the recent credit crunch and sub-prime lending crisis.
Among the mortgage providers to respond immediately to the cut were Halifax, Nationwide, HSBC subsidiary first direct and the Co-operative Bank.
Halifax explains that customers on its standard variable rate are to see their interest charges fall from 7.75 per cent to 7.5 per cent with effect from January 1st 2008.
The Co-operative Bank goes slightly better - but only just - with a rate of 7.49 per cent to be charged from the same date.
But the financial institution asserts that it differs from its rivals in calculating interest on a daily basis and not imposing higher lending charges on any of its products.
Customers of Nationwide could be facing a more preferable rate, providing they are subscribed to the firms Base Mortgage Rate product.
Following the MPC decision, the interest rate chargeable on such accounts has been lowered to 6.99 per cent.
Nationwide states that this is about half a percentage point below the majority of its rivals - a contention supported by the Halifax and Co-operative Bank figures.
The provider adds that if all lenders pass on the full 0.25 per cent reduction in interest, all affected mortgage holders could see a reduction in costs of £12,000 over the course of a 25-year £100,000 mortgage.
While Nationwide, like its counterparts, is bringing the new rate into effect on January 1st, first direct customers are told to expect an immediate impact.
Chief executive Chris Pilling explains that the online lenders clients are "the first in the country to benefit" from the rate cut, with the firms standard variable rate lowered to 6.5 per cent immediately on December 6th.
For savers, though, the news of the base rate drop may not be so welcome, as the financial institutions have hinted - but not yet elaborated - on likely reductions to the interest payable on their savings accounts.
Both Nationwide and Halifax suggest that their savings products are currently under review, but the former states that an announcement will be made "in due course", while from Halifax details are expected "later this month".
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