Around 20,000 people in the UK are enjoying an unexpected windfall because their mortgage payments have all but gone away. In the case of Marc Weitzman, a 35 year old curtain dealer, he is now able to take his family on holiday to Minorca as his mortgage payments have fallen to £25 per month.
Marc and others like him have benefitted from the Bank of England base rate which currently stands at just 0.5%. Marc was fortunate enough to take out a tracker mortgage which tracks the base rate. This means that as the rate changes, so does his monthly mortgage payments.
“It was jaw on the floor time,” said Weitzman, whose payments on his two-bedroom cottage on the edge of London peaked at £966 in the Autumn of 2007. “It’s just been going down and down and down and down.”
Marc took out three year base rate tracker mortgage for £215,000 with the Halifax in November 2006. The three year deal was at 0.36% below the Bank of England base rate, giving him an annual interest charge of just 0.14% at the current rate.
Mortgages like these are an example of how bankers failed to forsee the current situation and helped to drive up prices in the UK and the US.
These products “assume a cycle of perpetually increasing house prices,” said Martijn van der Heijden, head of U.K. mortgages at London-based HSBC Holdings Plc, which avoided the mortgage price war. “We thought, ‘We can’t make the sums work, how can they?’ It turned out they couldn’t.”
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This is great but most people are losing more money in the value of their homes then interest rates have saved them and to top it off clients may even find that they have negative equity and stuck on varibale rates in a rising market.