Rates just 2% but where are the trackers?

The Bank of England has cut interest rates by 1% in a coordinated move with other central banks.

The latest reduction follows a 1.5% decrease last month and a 0.5% cut in October and is part of an emergency plan to stimulate activity in the economy. At just 2%, interest rates are at their lowest since 1951 and there is wide spread speculation that they will drop again in the new year, with some predicting they will fall as low as 0%.

This is fantastic news for those on existing tracker mortgages, who should begin to benefit from lower monthly repayments as lenders have come under pressure from Government to pass on the new rates to their customers and waive so called 'collars' that prevent base rate trackers from falling below a certain point.

Sadly the market for new trackers is seriously restricted but our mortgage advisers are compiling a list of those clients who are interested in trackers so that we may contact them when more competitive deals emerge again.

In order to gain maximum benefit from your lower mortgage repayments, you could overpay to reduce capital outstanding to the lender or perhaps invest up to £7,200 in a tax efficient equities based ISA. These will historically give better returns over time than mere cash investment and with the yield on many household name shares now higher than returns on bank accounts there could also be significant upside potential from current depressed share prices.

Another option is to take advantage of lower mortgage repayments by taking a lower salary now that your costs have reduced and investing a higher proportion of your income into your pension via salary sacrifice. Not only will you benefit from a boost to your retirement 'nest egg', you will also benefit from the tax and national insurance breaks offered on income paid directly from contract into your pension - so you keep your hard earned cash out of the tax man's grasp as well!

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