Interest Rates

[sp1814]

Now that the Bank Of England has reduced the baseline interest rate to 1%, what happens to those people who have tracker mortgages pegged at a couple of interest rates below base rate???

Will they get interest off their mortgage lenders?

If their building society is late with payment, can their mortgagees take out a court injunction to claim monies?

This is a serious question, because a mate of mine at work claims that there are 'below base rate' mortgages.

[Richard1966]

I have a work colleague who has a 1% below base rate mortgage. They claim to have been told that they only need to pay an element towards the capital repayment.

I would be very surprised if the mortgage agreement allows for the borrower to be paid, I suspect that there will be a clause in the agreement somewhere that covers this situation in some way. probably a minimum payment or nil payment.

[Postdog]

According ro something I read weeks back when this first seemed likely, in theory they need not pay anything.

In practice, you might as well pay it - won't do any harm

[Octavius]

They usually have a tracker 'floor' rate which is the lowest the bank will allow. More often this means payment rate will not go below between 1% and 3%.

Lenders may also have a clause that allows them to adjust their loan rate when the base rate goes 3% or below.

So its not all as clear as that. Best thing woud be to keep paying as much of the capital off as possible so that your loan decreases over time - if you are able.

[LucyThomas5]

More important are people like me who have considerable savings and now find that the interest we receive on our capital has been reduced to virtually nothing.

[Gromit]

LucyThomas5,

Have you considered dying. You seem to be in favour of it for Scottish Members of Parliament, and it will save your bleatings falling on deaf ears.

[Twenty20]

As said above, there is very often a floor to tracker rates i.e. a rate below which they dont fall. This is in the T&C, although a few lenders have waived it recently.

Also, most people's mortgages are not interest only mortgages so, although the interest element will be very low, they will still have to repay the capital (the amount they borrowed) each month.

Buy to Let mortgages on the other hand are more often interest only (you would repay the capital at the end of the term, not monthly) and these payments can get very low as the interest rate tumbles - as I know from personal experience!