NO QUARTER; CREDIT CRUNCH CRISIS RATES GO DOWN Bank Rate Cut but Millions Still Suffering

The Mirror (London, England), April 11, 2008 | Go to article overview

NO QUARTER; CREDIT CRUNCH CRISIS RATES GO DOWN Bank Rate Cut but Millions Still Suffering


Byline: BY GRAHAM HISCOTT DEPUTY BUSINESS EDITOR

MILLIONS of homeowners had nothing to cheer about yesterday despite the Bank of England cutting its base rate again.

The 0.25 per cent reduction to five per cent should help the one in five mortgage holders on tracker and variable rate deals.

But for the two in three homeowners on fixed rate mortgages the misery continues to grow as they run out of time on cheap loans - while the price of new ones is still soaring.

Nationwide and Alliance & Leicester yesterday joined the roll call of lenders making rises of up to 0.35 per cent on fixed-rate offers.

For Alliance & Leicester it was the second increase in a week while Nationwide last raised its prices a fortnight ago.

Policy makers are hoping yesterday's interest rate cut - the third since December - will be enough to prevent the economy sliding into recession. But critics branded it too little, too late amid mounting fears that the financial storm battering Britain is worsening.

Last night financial guru George Soros accused the Bank of England, under governor Mervyn King, of being "behind the curve." He said the financial crisis caused by the credit crunch was the worst he had witnessed in his lifetime.

Some lenders quickly vowed to pass on the rate cut for standard variable rate mortgages.

These included the Halifax, Cheltenham & Gloucester, First Direct and Nationwide. Monthly payments on a variable pounds 100,000 loan will fall by pounds 16. Yet more than 1.4 million homeowners face a shock as cheap fixed deals expire this year.

To add to the extra costs, buyers have been hit with a massive rise in mortgage fees.

The average application fee for a home loan has rocketed 55 per cent from pounds 532 to pounds 827 since November 2006 - the last time the base rate was five per cent. During that time, the cost of a typical fixed rate mortgage has soared from 5.48 per cent to 6.25 per cent, according to the website MoneyExpert.com.

David Kuo, of financial website Fool.co.uk, said: "In a month the mortgage market has gone from financial jungle to law of the jungle, which has left many borrowers bereft of choice."

Figures this week showed average house prices plunged by 2.5 per cent in March.

HOW THE BANKS HAVE REACTED

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NO QUARTER; CREDIT CRUNCH CRISIS RATES GO DOWN Bank Rate Cut but Millions Still Suffering
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