Many people will be happy with another 1% reduction in the Bank Of England rate but every reduction in interest rates will make our life harder in the future. It’s fair enough for those with huge mortgages who make the normal monthly payments but if, like us, you are paying extra to clear the mortgage as quickly as possible the monthly payment doesn’t go down. True, there are savings on the interest payable over the next couple of years but then comes the sting.
By 2010 a 1% reduction in mortgage rates will save us around £600 which is to be welcomed but what happens when we sell the house and put the proceeds in a savings account? If we keep the full amount in the bank for a year we lose around £1500 in interest. After that, if we keep around £40,000 in the bank we will lose £400 every year for the rest of our lives.
Not such good news after all then?
