 and they usually rise when interest rates are increased. In an unprecedented move Barclays became the first bank to cut bills for mortgage customers on standard variable rates, known as SVRs. The Bank of England used yesterday's announcement as an opportunity to revise its predictions on how much interest rates will rise in future, and this may bring some relief on mortgage bills. After the mini-Budget it had warned that they would hit 6% next year, which caused mortgage lenders to hike fixed bills. However, yesterday it said that rates would hit a maximum of 4.6%. This is because the higher base rate will soothe the financial markets and lead to a fall in swap rates – which is what mortgages are priced on. This opens the way for lenders to reduce some rates. Lenders price mortgages based on what financial markets predict interest rates will be in the next few years, rather than what the current interest rate is. Fixed-rate mortgage holders are cushioned from the immediate impact of the base rate rise, but there are concerns that people will have to re-mortgage onto a much higher rate when they eventually come off their deal. The remarks could be a glimmer of hope for the){kind=link}
MAJOR banks have cut mortgage bills for some customers – despite the Bank of England hiking interest rates.
The central bank raised its base rate of interest yesterday by 0.75 percentage points to 3% – the biggest increase in 33 years.
It means that rates are now at their highest level since December 2008.
The bank warned that further rises might be required to bring down runaway inflation,
But there may be a glimmer of hope for homeowners, as some high street banks have announced a surprise cut to rates which will see some customers’ mortgage bills fall.