The Bank of England has voted to cut interest rates in March amid further evidence of falling house prices.
Despite hints from key members of the Monetary Policy Committee (MPC) that inflation is set to rise sharply, it voted for interest rates to fall to 5% and ease the pressure on home owners struggling to meet increase repayment costs. The news will also aid first-time buyers priced off the property ladder by rising mortgage rates.
However, the Council of Mortgage Lenders has warned that the interest rate is not the only factor that determines the cost of mortgages. It says this latest cut will not automatically mean cheaper mortgage rates across the market.
The latest figures from the UK's largest mortgage lender Halifax show that house prices fell in February. It also warned that property values will remain flat in 2008, a loss in real terms for many home owners.
Impact on tracker mortgage borrowers:
|Loan size||Repayment mortgage||Interest-only mortgage|
|Before - 6.05%||After - 5.8%||Saving||Before - 6.05%||After - 5.80%||Saving|
|£150,000||£982.48||£959.33|| £23.16 ||£756.25||£725||£31.25|
| Source: CML based on the average mortgage rate as of December 2007 |