UK Interest Rates Sink to Lowest Level in UK History
12 noon on 5th February 2009 saw UK interest rates sink to their lowest level in UK history. Anybody with a standard variable rate mortgage should be in line to collect a windfall of cash as their mortgage repayments go down next month. The Bank of England Base Rate has dropped from 5% to 1% since October 2008, leaving struggling homeowners and buy to let landlords quids in.
Prior to October 2008 people on a fixed rate were dreading the usual hassle of re-mortgaging. House values were dropping fast and credit was hard to come by as lenders were protecting their rapidly falling balance sheets and reducing their exposure to the falling UK housing market. The sweet interest rates on offer were often laced with poisonous administration fees and other fees which, when taken into account in the amount of mortgage repaid every month, often meant the borrower was the same or more often, worse off. The headline rate was a real teaser!
In times like this it’s time to take heed of that old adage – “make hay while the sun shines”. Because although it might not feel like the sun is shining right now in the general global economy worldwide, it is YOUR economy that counts and now is the time to try and turn the tide.
With the savings made from reduced mortgage repayments it would be advisable to take one or all of the following actions:
- build up a savings buffer of approximately one to six months monthly expenses, including monthly debt commitments. If your debts are high I would suggest saving up a two month buffer and then begin to tackle the high interest rate debts
- pay extra off of the credit cards. Never be satisfied in paying the minimum amount. If possible cut a few up and cancel the accounts with the credit card provider. This will actually help your credit score, particularly if you’ve been hammering it in the run up to Christmas.
- check with your mortgage provider first, but oftentimes you can make capital repayments off of the mortgage balance. It might be a minimum of £1,000 or a multiple of your monthly payment. Either way, check with your lender to ensure you can make lump sum payments of capital without incurring any charges.
- pay off any money you might owe friends and family. They are often the last to be paid because they are the most patient, yet treat them badly by making them wait too long time for their money and you will quickly alienate them, possibly closing off a much needed avenue of help in the future should it be necessary.
If you have any other magicmoneytips please post them using the comment box below.
Tagged with:credit cards • debt repayments • interest rates • mortgage repayments • UK interest rates
Filed under:Debt Reduction
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