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| Q&A: The Bank Rate cut and you | Q&A: The Bank Rate cut and you |
| (30 minutes later) | |
| The Bank of England has cut Bank Rate from 5% in April to 2% now | The Bank of England has cut Bank Rate from 5% in April to 2% now |
| The Bank of England has cut its official Bank Rate for the third month in a row. | The Bank of England has cut its official Bank Rate for the third month in a row. |
| It now stands at 2% as the Bank tries to stave off the effects of the impending economic recession in the UK. | It now stands at 2% as the Bank tries to stave off the effects of the impending economic recession in the UK. |
| We look at how the latest cut will affect borrowers, savers and others. | We look at how the latest cut will affect borrowers, savers and others. |
| Will my mortgage be cut quickly? | Will my mortgage be cut quickly? |
| The government certainly hopes so. | The government certainly hopes so. |
| In November, it put huge pressure on lenders to pass on the full 1.5% cut in Bank Rate straight to their borrowers, even though many banks did not really want to. | In November, it put huge pressure on lenders to pass on the full 1.5% cut in Bank Rate straight to their borrowers, even though many banks did not really want to. |
| The [Bank rate cut] cannot be reflected universally in lower mortgage rates Council of Mortgage Lenders UK mortgage market in graphics | The [Bank rate cut] cannot be reflected universally in lower mortgage rates Council of Mortgage Lenders UK mortgage market in graphics |
| And as several current and former lenders are now wholly or partially nationalised - or about to be - the government has even more influence than before. | And as several current and former lenders are now wholly or partially nationalised - or about to be - the government has even more influence than before. |
| Whether you get all or part of the benefit of the bank rate cut will depend on your type of mortgage. | Whether you get all or part of the benefit of the bank rate cut will depend on your type of mortgage. |
| Fixed rates will, by definition, stay the same. | Fixed rates will, by definition, stay the same. |
| Tracker rates directly linked to Bank Rate should come down, though cuts may be limited if there is a floor to how low they can go on any particular deal. | Tracker rates directly linked to Bank Rate should come down, though cuts may be limited if there is a floor to how low they can go on any particular deal. |
| Lenders may be a bit more fussy about how much they pass on to people on standard variable rates. | Lenders may be a bit more fussy about how much they pass on to people on standard variable rates. |
| The Council of Mortgage Lenders has said that the latest cut "cannot be reflected universally in lower mortgage rates". | The Council of Mortgage Lenders has said that the latest cut "cannot be reflected universally in lower mortgage rates". |
| See who has cut mortgage rates | See who has cut mortgage rates |
| What is the problem? | What is the problem? |
| Two things. | Two things. |
| Banks and building societies would really like to charge much more for their mortgages, to help restore their profits and reserves. | Banks and building societies would really like to charge much more for their mortgages, to help restore their profits and reserves. |
| In an ideal world - or at least, their ideal world - they might hog all the benefit of the Bank Rate cut for themselves and enjoy a very fat profit margin on their lending. | In an ideal world - or at least, their ideal world - they might hog all the benefit of the Bank Rate cut for themselves and enjoy a very fat profit margin on their lending. |
| That has already happened to borrowers taking out new mortgage deals, for many businesses with variable rate overdrafts, and for credit card borrowers. | That has already happened to borrowers taking out new mortgage deals, for many businesses with variable rate overdrafts, and for credit card borrowers. |
| The banks would also like to charge current mortgage customers a wider margin on their deals too. | The banks would also like to charge current mortgage customers a wider margin on their deals too. |
| What about savers? | What about savers? |
| They are the other thing. | They are the other thing. |
| There are many more savers than borrowers, although typically savers have much less tucked away in their accounts than the average home buyer has borrowed. | There are many more savers than borrowers, although typically savers have much less tucked away in their accounts than the average home buyer has borrowed. |
| But banks and building societies are not keen to cut savers' rates very much. | But banks and building societies are not keen to cut savers' rates very much. |
| They want to make sure there is still some sort of incentive to save. | They want to make sure there is still some sort of incentive to save. |
| They are worried that might evaporate if Bank Rate is cut further. Some economists are predicting it may go to zero in the next year. | They are worried that might evaporate if Bank Rate is cut further. Some economists are predicting it may go to zero in the next year. |
| Normally the many different savings and deposit accounts, especially the highest paying ones, are tweaked to reflect changes in the official cost of lending. | Normally the many different savings and deposit accounts, especially the highest paying ones, are tweaked to reflect changes in the official cost of lending. |
| Exactly how much may vary a lot between different savings institutions, depending partly on how desperate they are to attract your money. | Exactly how much may vary a lot between different savings institutions, depending partly on how desperate they are to attract your money. |
| Will my business loan or overdraft be cheaper? | Will my business loan or overdraft be cheaper? |
| The government's comments suggest it is particularly sensitive to your needs. | The government's comments suggest it is particularly sensitive to your needs. |
| RBS NatWest is now under majority government ownership and Lloyds TSB will soon find the government is a very large minority shareholder as part of its arrangements to take over HBOS. | RBS NatWest is now under majority government ownership and Lloyds TSB will soon find the government is a very large minority shareholder as part of its arrangements to take over HBOS. |
| Both are passing on the full 1% cut to their many small business customers, who have variable-rate overdrafts and loans. | Both are passing on the full 1% cut to their many small business customers, who have variable-rate overdrafts and loans. |
| I am dead keen to buy a flat or house. This is all good news, surely? | I am dead keen to buy a flat or house. This is all good news, surely? |
| The interest rate on your prospective mortgage will probably be lower. | The interest rate on your prospective mortgage will probably be lower. |
| But, frankly, paying your monthly repayments will not be your big problem, so long as you keep your job. | But, frankly, paying your monthly repayments will not be your big problem, so long as you keep your job. |
| The main way in which mortgages are being rationed is by lenders demanding large deposits. | The main way in which mortgages are being rationed is by lenders demanding large deposits. |
| Most mortgage deals now require 15%, 20% or even 25% as a down payment. And the best deals require deposits of 40%. | Most mortgage deals now require 15%, 20% or even 25% as a down payment. And the best deals require deposits of 40%. |
| There is a good reason for this, by the way. | There is a good reason for this, by the way. |
| House prices are still falling fast and some experts think they could fall another 20% this coming year. | House prices are still falling fast and some experts think they could fall another 20% this coming year. |
| How happy will you be if our home has lost a fifth of its value in 12 months' time? | How happy will you be if our home has lost a fifth of its value in 12 months' time? |
| Think before you buy. | Think before you buy. |
HOW MORTGAGE LENDERS RESPONDED | HOW MORTGAGE LENDERS RESPONDED |
| Lender SVR before Nov BoE decision SVR after Nov BoE decision Rate change (percentage points) SVR after Dec BoE decision Rate change HBOS 6.50% 5.00% -1.5 4.75% -0.25 Nationwide BS 6.19% 4.69% -1.5 Under review  Abbey 6.94% 5.44% -1.5 Under review  Lloyds TSB/ C&G 6.50% 5.00% -1.5 4.00% -1 Northern Rock 7.34% 5.84% -1.5 Under review  Barclays 6.64% No change  5.49% -1.15 RBS 6.69% 5.19% -1.5 Under review  HSBC 6.25% 5.44% (5 Dec) -0.81 4.44% -1 Alliance & Leicester 6.94% 5.84% -1.1 Under review  Bradford & Bingley 7.09% 5.59% (7 Dec) -1.5 Under review  Bristol & West 6.59% 5.49% -1.1 4.49% -1 Britannia BS 6.30% 5.30% -1 Under review  Yorkshire BS 6.60% 5.60% -1 Under review  GE Money 10.39% 8.44% -1.95 Under review  Coventry BS 6.84% 5.34% -1.5 Under review  Standard Life 6.59% Under review  Under review  Clydesdale & Yorkshire 6.64% 5.14% -1.5 Under review  Chelsea BS 6.94% 5.79% (31 Dec) -1.15 Under review  Skipton 6.45% 5.95% -0.5 Min 5% Min -0.95 One Account (RBS) (avg) 6.55% 5.55% -1 Under review  SVR: Standard Variable Rate. All initial changes on 1 December unless stated. All the latest changes on 1 January. | |
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