Borrowers Nearing Interest Free Home Loans

Mon, 12 Jan 2009

The Bank of England’s latest interest rate cut has brought interest free mortgages a step closer to becoming reality. Some borrowers who took out tracker deals in recent years are now celebrating incredibly low interest rates, with Cheltenham and Gloucester’s two year tracker deal offered in summer 2007 offering an interest rate 1.01 per cent below the base rate . Whilst the loan deal was accompanied by a hefty arrangement fee, interest rates on the deal are now just 0.49 per cent. Therefore, a further half point cut would potentially see borrowers on this deal paying zero interest.

Whilst there are an estimated four million borrowers on tracker deals, experts suggest that only 100,000 borrowers have loan deals at half a per cent below the base rate or better. Those on tracker deals have benefitted significantly from the recent interest rate cuts, with huge reductions in their monthly repayments .

An example of such a borrower is Manchester ased sales executive Suzanne Roberts, who is currently paying 1.14 per cent interest on her mortgage following last week’s cut. The two year tracker deal she took out with Abbey last February was initially accompanied by repayments of £877 a month, though that figure has now fallen to £577.
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