Interest-free mortgages could become a reality for some.
Homeowners who have taken out mortgages which track below the Bank of England base rate could be paying zero percent interest if monetary policy is tightened further. According to a report in the Guardian, Cheltenham & Gloucester (G&G), Nationwide and the Co-operative Bank all launched such deals earlier this year.
The newspaper states that the Cheltenham & Gloucester mortgage is set at base rate minus 1.01 percent, while the Co-operative Bank deal tracks at base rate minus 0.61 percent and the Nationwide loan offers base rate minus 0.27 percent.
Ray Boulger from the mortgage broker John Charcol said: "If Bank of England base rate were to fall to one percent - and in the US it's already at one percent - then borrowers with this C&G loan could see their pay rate fall to zero, or technically below zero. At that point, the bank would be paying you to have a mortgage."
David Hollingworth from London & Country advised homeowners who have one of these below base rate trackers to use any spare cash they may have to overpay on their mortgage while rates are so low.
Last week's move by the Bank of England's monetary policy committee brought interest rates to their lowest level since 1955.
