Winners And Losers In The Homeowner Loan Market
Yesterday (Thursday 4th March) the Bank of England held its usual monthly meeting of its Monetary Policy Committee (MPC). During this meeting it was decided not to change the current level of quantitative easing, of £200 billion and the bank base rate of interest on loans and savings would remain at the same record low level of 0.5 per cent.
It has now been 12 months since the bank base rate reached this historical low level and although it is inevitable that interest rates on loans will increase at some point in the not too distant future, many borrowers have breathed a sigh of relief for another month.
Those borrowers who have faired best over the past twelve months have undoubtedly been those on a standard variable rate or tracker rate home owner loan, as they have seen their monthly loan repayments drop significantly.
With standard variable rates and tracker rates falling to particularly low levels, it has not been in the interests of borrowers with this type of loan to look for a remortgage to get a cheaper loan deal, as most products on the market at the moment are significantly more expensive than their existing loan.
The losers in the low interest rate environment are those people who opted for a fixed rate loan prior to rates dropping, as many of these individuals will have been tied in to higher rates, without the option to remortgage to a cheaper loan due to restrictive early repayment penalties on their existing loan.
Similarly, those individuals who have been looking for a new loan to purchase a house over the course of the past twelve months will have had a difficult time finding a cheap loan deal to compare with lenders’ standard variable rates, as tighter lending criteria, lower loan to value ratios and a lack of wholesale funding has pushed up the cost of most home owner loan products currently available.
