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BoE Drop UK Interest Rates to 2%

edesignuk

edesignuk

Moderator emeritus
Original poster
Mar 25, 2002
19,232
2
London, England
A month ago: BoE Drop UK Interest Rates to 3%

...and now...
The Bank of England has cut interest rates by one percentage point, from 3% to 2% - the lowest level in more than half a century.

The move has been welcomed by many commentators who said the cut would help the slowing economy.

Hetal Mehta, of the Ernst & Young Item Club, said the cut was the "right medicine at the right time".
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BBC.

The Government had better make sure those bastard banks pass on the savings to their customers.
 
edesignuk said:
The Government had better make sure those bastard banks pass on the savings to their customers.
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Whilst I agree with this somewhat if the customer wanted a guarantee of any drops being passed on to them they could have chosen a product that offers that (a tracker mortgage tracking the BoE base rate, like my new mortgage :D). But most people did not. So that's their own fault.

It's not like the banks can actually borrow money at BoE base to fund the mortgages of their customers. You can't exactly go to the BoE and say "Your base rate is 2%, I've got a customer who wants a £250000 mortgage, I'll be borrowing that off you at 2% for 25 years". The complexity of the system is massive, but the real rate that has an actual impact on the rate that mortgage lenders can finance their books is LIBOR.

As we can see the various term LIBOR rates tend to be higher than the BoE base rate, sometimes much higher. As LIBOR is not set, rather is based of actual rates it is something the BoE has very little influence over. They could set the base rate to 0% and LIBOR could still be 10% (or any number really) if the banks viewed lending as a risk and needed to price that in.
 
Nice one. My mortgage has just been reduced by about 100 quid. Now I just have to hope I don't get made redundant :)
 
ShaunPriest said:
Is that per month? That's a huge saving!
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Yup. I'm glad we chose a BoE tracker mortgage. Once this further reduced interest rate kicks in, we'll have a mortgage that's at least £250 cheaper than it was when we re-mortgaged earlier this year.

Although remortgaging in a year's time might be a bit tricky with the lack of products on the market
 
stomer said:
Yup. I'm glad we chose a BoE tracker mortgage. Once this further reduced interest rate kicks in, we'll have a mortgage that's at least £250 cheaper than it was when we re-mortgaged earlier this year.
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Maybe. It depends on the product. Most trackers have defined floors below which the rate will not fall, no matter how low the BoE rate goes. For example, iirc, the tracker I am re-mortgaging too will never go below 3% even if the BoE rate drops to 0...
 
robbieduncan said:
Maybe. It depends on the product. Most trackers have defined floors below which the rate will not fall, no matter how low the BoE rate goes. For example, iirc, the tracker I am re-mortgaging too will never go below 3% even if the BoE rate drops to 0...
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Just got a letter through from the Co-Op stating that the SVR will be 4.74%. I just phoned them to confirm that our rate should be BOE+0.34%, and that is indeed the case.
I was frantically check our mortgage agreement for any clause stipulates a minimum interest level, fortunately there is none. So our saving is around £200 and our property isn't anywhere near £200k.

Even when our offer period finishes in just over a year's time, our rate will be BOE+0.69%, this is still cheaper than anything else out there at the moment. I can't believe how lucky we've been.
 
What interest rate are we at now? .5%?

My cash ISA has plummeted even further from 2.75% to something ridiculous. There is no motivation to save!
 
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