Base Rates drop to 1.5%

The drop comes as no surprise to industry professionals and consumers alike, following the 1% cut last month and 1.5% cut in November. However, the decision has been met with mixed reviews as some feel that even lower rates are not having the desired effect in terms of boosting the economy.

Whilst the rate drops will be beneficial to homeowners on tracker mortgages, people trying to move onto or up the housing ladder are being hampered by the lack of lending from banks which are increasingly asking borrowers for unreasonably large deposits. There is concern amongst some that rate drops alone cannot solve the housing issue and that the Government must turn its attention to buying empty properties and buying so called toxic assets from the banks to free up capital so that banks begin lending again.

What's more, many lenders are beginning to employ the collar clauses in homeowner's contracts that prevent tracker rates from falling below a certain level. This could mean that further rate cuts will have little to no impact on people mortgages.

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