A Positive View Of Today’s Interest Rate Cut

Unsound as a pound

As Tristan at Find Financial Freedom points out, a lot of media analysis of today’s interest rate cut to 1.5% has been negative, focusing on the fact that it won’t mean the banks will lend more to businesses and consumers or get more foreign investment in.

Indeed, my initial thoughts were less than positive, questioning whether it would have any effect, but then I’m just a disgruntled fixed-rate mortgage holder who’s not seen any benefit from any of the cuts. I’m just thankful I haven’t got any savings sitting earning near 0% interest.

So what positive aspect can we take from today’s cut?

Well, as 40% of mortgages are trackers (as far as I recall), then in theory that many mortgage holders will be seeing some sort of rate cut in the coming weeks, along with those on their lenders’ standard variable rates (if the banks play ball). Plus the average mortgage borrower should be paying over £500 a month less in interest than they were back in November 2007, which has got to be good for them, with more money in their pockets, and the economy, where it will (hopefully) be spent.

Of course, they may want to put their extra money into a mortgage overpayment to watch the term of the mortgage and the total interest paid drop away.

What other positives of today’s interest rate cut can you think of? Let us know in the comments.

Creative Commons License photo credit: Andy Beez

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2 thoughts on “A Positive View Of Today’s Interest Rate Cut

  1. Could point about the overpayments Rob, I didn’t focus on that, I was just thinking in terms of the wider economy and how the extra money in people’s pockets would probably lead to an increase in consumer spending.

    I guess from my experience as a mortgage broker, the vast majority of people won’t consider using the interest rate savings to over pay their mortgage, but it is still very good advice.

  2. It was a little bit of a shameless plug for our mortgage overpayment calculator, of course if people are finding they’ve got more money in their pockets each month, they should look at all of their finances and decide where it should go – some might want to start building up an emergency fund, others might want to take out unemployment cover, etc. etc.

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