Q. As a dentist with a lot of debt, the recent drop in interest rates is welcome news.
But much to my dismay and increasing anger, my lender has not reduced their standard variable rate on which my loan is based. It seems to me that many lenders have reduced their rates in line with the Bank of England reductions, especially after pressure from the government.
Are there many lenders who have not played ball?
A. We certainly sympathise with your point here.
As you say, most lenders have reduced rates, even though not always as swiftly as they should, and sometimes by not as much as the Bank of England reduction.
As of the end of November, around 5 main Banks, and circa 7 Building Societies (tending to be the small ones) have held their rates the same, despite the 1.5% drop announced in early November. The Bank you are with may have a grand name, but in our opinion is certainly not showing any class.
As we write, the Bank of England has just announced a further reduction of 1%, meaning that the base rate is now just 2%, the lowest since the 1950s. This means that the rate you are currently paying is almost 3 times the base rate! Of course the Bank may decide to reduce their rates by more than the recent reduction and in effect ‘catch up’. Then again they may not move at all, or reduce their rates only slightly.
You should see what happens in the next few weeks, and then decide whether to look to remortgage. Be aware of the current trend towards high fees attached to a lot of the better deals out there and of course check on any exit penalties on your current loan. To qualify for a good rate you will also need a loan to value of typically less than 75%.
Finally, as we have covered recently in our communications, it is an excellent time to pay the same amount per month even if you do not need to, or overpay (if you are able to), as money previously that would have gone to pay interest will now help pay off capital.
The saying ‘mend the roof whilst the sun shines’ is very apt.
About Graeme Urwin
