Interest rate cut

[Meanqueen]

Banks are a necessary evil, I need mine for mortgage and a few direct debits, and at the moment, for benefits and insurance incomings, later for pension, I also use my cheque book to make payments. I make sure that I do not give away my money to the bank, the little bit I have in there might make them a few bob in investments, but it is highly likely that I cost them money. If all their customers were like me, they would go out of business, some of them have, but that's not my fault.

It's not so long ago that my bank wrote to me offering me a reserve fund, just in case I got caught short, I declined their kind offer. I felt this was a dirty trick tactic to try and entice me into debt, I am not that daft, I told them what to do with it.

Ilona

[stormingnorman]

As an Independent financial adviser and mortgage broker I feel I can offer some free advice to those who will enjoy a rate cut in their mortgage.

BITE THE BULLET AND KEEP ON PAYING THE SAME AMOUNT MAKING SURE THAT OVERPAYMENTS ARE APPLIED TO CAPITAL.

Obviously if you have penalties in place it may not be a good idea but you can normally overpay by 10% in any one year anyway.

Reduce your mortgage as much as you can by utilising the " rate cut" this will help to offset the drop in value and weill stand you in good stead if and when you want to move in the future. Adopt the attitude that if they hadn't reduced you would have found it anyway

Stormingnorman

[Meanqueen]

Thanks for that advice, Norman. I rang my lender today to get some figures for the job centre, and I see my mortgage has gone down a trifle. As my repayments are very low anyway, I will leave it as it is, only a couple of quid difference, and I am unemployed, but I take your point. In the past I have saved up lump sums and paid them over the counter to reduce the capital.

Ilona

[Evie]

Totally agree the more you can pay off your capital the better.
Every pound counts.

[spudley]

we have a tracker mortgage, it was quick to track up but has not gone down, why? i thought that the whole point of them was to follow interest rates. Our mortgage is large (even though we were supposed to be downsizing) and went from nothing on our old house to ridiculus now.
To be honest i know that it is paying the mortgage off, but what is they are still charging me the same amount of interest on the capital?, I am no better off, and to be honest could do with a bit of a reduction at the moment..

[stormingnorman]

Assuming the mortgage is set to track BOE rate it will normally follow any rate change the following month, up or down, however some do have a "collar" a minimum below which it will not fall.

Most modern mortgages have a daily gharging rate, which means that interest is added daily on the outstanding balance. Therefore if you overpay even by a small amount in reducing your capital you are therefore reducing the amount of interest charged. A bit like compound interest in reverse However if you do not make it clear that overpayments are to reduce capital there is a danger that it is treated as advance payment and therefore not having the same effect.

Storming norman

[spudley]

thanks storming norman, its very complicated though and very round about.

[Gwiz]

I was wondering if any of you chaps and chapesses bank with the co-op?
I have heard that they are slightly more "ethical" than some like the "midnatbarcloyd bank"

[smallholderwannabe]

Last time round, we took Stormingnorman's advice of not reducing the payments after a rate cut and will be paying off our mortgage this autumn but 10 years early.



I was always surprised how much of a difference a little overpayment made in the grand scheme of things.

[wendy]

We did exactly the same SHW.
Only our interest rate went up to 16 %. !
When it came down we kept it the same. Did that take it down quickly.
Wendy