Today (Weds March 5th) marks five years since the Bank of England cut interest rates to their record low of 0.5%, Gocompare.com’s Jeremy Cryer comments on the how the five years of low rates have affected consumers’ pockets.
Jeremy said: “Mortgage holders have definitely been the winners since the interest rate cut, with some having seen massive drops in the amount of interest they pay each month, while others have been able to take advantage of the great deals that were tied to the base rate. Although most of them have now ended, there are still some relatively low interest mortgage rates to be had.
“These low interest rates have certainly helped people manage their money and mortgages, especially with real wage packets not increasing with rates of inflation. The Council of Mortgage Lenders report that between April 2005 and March 2012, 2.3 million borrowers paid off more than the contractual amount for their mortgages, that equates to around 34% of all mortgages taken out during that period.*
Jeremy added: “Whilst the story for those paying their mortgage has been good, these five years have been especially painful for savers - the record low base rate means that people who have been squirreling away their money have lost out big time, with savings interest rates barely rising in the past five years.
“If interest rates rise, as confidence in the economy and the housing market grows, savers will hopefully see their thriftiness pay dividends and see some rewards for their savings.
“The credit card market has seen unprecedented deals for balance transfers, which has really shaken the whole market up and this is great news for consumers. Never before has it been so easy to transfer existing debt and pay no interest on it for up to 31 months, which is nearly the equivalent to a two and a half year interest-free loan.
“Although these are great deals, consumers have to remember that they have to pay that debt off, and if they don’t pay the whole debt off within the interest free period, they will have to pay the card’s normal APR.
“Overall the record low interest rates have helped a lot of people stay in the black. Hard pressed householders and small businesses have benefitted, but for savers it’s been a difficult few years.”
Notes to editors:
*CML Regulated Mortgage Survey. Overpayments defined as those exceeding 105% of estimated scheduled payments since origination, to allow for estimation error.