Thousands of homeowners could see their repayments cut to just 8p a month if the Base Rate is reduced again this week.
Over 1,500 homeowners could see their monthly mortgage repayments cut to just 8p this week, should the Bank of England lower interest rates as expected.
The ‘lucky few’ are those on what is believed to be the lowest mortgage rate currently in force – a tracker deal that runs 1.01% below the Bank of England base rate.
While the Base Rate currently sits at 1.5%, it is widely believed that the Bank of England’s Monetary Policy Committee (MPC) will act to slash it to an all time low of 1% when they meet later this week. Consequently, those on the aforementioned tracker deal will be left paying minimal interest on their home loans.
Offered by the Lloyds Banking Group-owned Cheltenham & Gloucester, the deal will see repayments for those with a £100,000 interest-only mortgage reduced to just 8p a month, with interest initially charged at 0.001%. However, once the bank adapts its computer systems to cope with the reality of a 0% mortgage, the repayments will be reduced to zero and the overcharged amount refunded.
Lloyds Banking Group have acknowledged that there is a 0% collar on the deal which prevents the bank from being in a situation where it needs to pay its mortgage customers should the MPC drop rates further.
Interestingly, not all tracker deals currently have this protection in place and the Council of Mortgage Lenders (CML) have appealed to the government for a 0% industry-wide collar on deals of this nature to prevent further upheaval in the banking sector.
