The UK Tracker Mortgage Rate Cut
By Anjitha Sakthidharan
Analysts are of the opinion that millions of homeowners in the UK will not benefit from any future cuts in interest rates. This is because the reduction of the Bank of England base rate on November 7 2008 to 3% allows lenders to use sub-clauses to block the benefits reaching the tracker mortgage clients.
Therefore mortgage experts believe that the borrowers with some of Britains biggest lenders including Nationwide and Halifax will not benefit from the cut bringing the banks under the scanner for not passing on the full benefit of the base rate cut to the customers. Forecasters are now saying the base rate could fall to as low as 1.5% or even 1% in 2009 as a drastic step to rejuvenate the economy.
It is feared that the customers wont benefit from the mortgage rate cut because the banks have fixed themselves limit to the extent of cuts they can pass on to the customers. For example the Nation-wide banks limit is automatically triggered when the base rate falls to 2.75%. On the other hand the Halifax limit is set at 3%. Three smaller lenders Skipton Building society Yorkshire Building society and its subsidiary Accord also have limits at 3% base rates. Analysts point out that many customers with the Chesham; Earl Shilton and Darlington building societies have already been affected by the inbuilt limits.
Similarly several other major banks such as the HSBC have certain terms and conditions that give them the discretion to stop slashing tracker rates if there is a material change in the mortgage market. Hence a large number of customers are disturbed by the slow reaction to base rate cuts even though the government has pumped GBP37bn into these banks to bail them out.
It is widely felt that although banks have the right to take care of themselves against losses they cannot ignore the interest of the customers especially when the government is extending the banks a rescue package with tax payers money. The limits and clauses set by the banks at the time of lending out loans are mentioned in fine prints often escaping the attention of the customers at the time of signing. Such oversights have now proven costly to the customers. This is a warning for them to study the contract carefully before signing especially when they are looking new mortgages in future.
The widespread protests have come to the notice of the banks and many of them such as the Halifax and other banks have issued statements that they are yet to take a decision whether to enforce the fine print term of putting a limit to the rate cut. What ever may be their decision they cannot ignore the fact that the government is helping them with tax payers money and hence they have a responsibility to pass on some benefits to their customers despite hidden clauses.
Hence it is expected that the banks will refrain from imposing the limits and pass on the benefits of the tracker base rate cut to the customers in accordance with the future trends.
About The Author
Anjitha is a financial adviser and well known for his finance related articles . You can find more financial articles written by the author by visiting the following link .
http://www.thefinanceworld.co.uk/tips-to-understand-commercial-mortgage.html