Lenders vow to pass on rate cut

[orchid5]

That is great news, i have a mortgage with the Halifax so will be checking the post, however i suppose this will mean that i need to contact my IP as soon as i am aware of any change in payment as i think i will be somewhere in the region of £50 better off, hey ho in one hand and out the other lol.

[kallis3]

Presumably, if you are paying some or all of the decrease across to your IVA, once the interest rate goes up, which it will eventually, you can just drop your payments back down by the appropriate rate without need for a variation?

[creditcrunched]

Yes that will have to be the case but i think we will be looking at a couple of years before it goes up in my opinion ,so now is the time to get your iva insurance and increases added to your I+E you need sorted put to the ip before payments are increased.

[kallis3]

I still have no idea whether Chelsea are dropping theirs or not. There is nothing on the website at all. I'll just have to wait and see.

[go_4_broke]

Please see my blog. . .

[james.c]

My partner BEV as already seen a £25 saving a month with the last cut, but this means an extra saving of £75 a month, a total of £100 its great

[james.c]

Does this mean any one with a mortgage in an IVA and gets these cuts, will they have to pay the extra money in to their IVA?

After all i have noticed alot of people have requested their IP to look and I an E due to energy price increase

[kallis3]

Yes, people who have the cut will have more disposable income.

[go_4_broke]

I had assumed the IVA would nab it, based largely on the principle that seem to nab pretty much everything else.

Some IP clarification would perhaps be useful. . .

[kallis3]

I imagine that you will have to pay it across as your disposable income will have increased. At least you will be paying more back to your creditors.

[MelanieGiles]

IPs will continue to review their income and expenditure on an annual basis, and if disposable income has increased as a result of interest rate reductions, additional payments will have to be me in accordance with the terms of the IVA - but only if both sides agree that they are affordable.

[David Mond]

In most cases because other costs have gone up like gas and electricity, food and fuel etc it is more than likely that the net saving in interest will be covered by increased costs.

We will also look at this at Annual Reviews.

[UpToMyNeck]

The reduction in base rates may not be the last we see, so expect them to come down again in 2009 in my opinion. Base rate movement decisions are based broadly on 2 factors, economic growth and inflation. If growth slows, rates are usually cut to stimulate consumer spending. However, we have an inflation rate in the UK significantly higher (around 5%) than the BOE's 2% target, so under normal circumstances that would signal an INCREASE in interest rates to slow down consumer spending, and bring the inflation rate back down. Where we are at the moment is we have an economy that is expected to slide into recession by the end of 2008/into 2009, and an inflation measure that is expected to come back towards the 2% target by the end of 2009, as all the price increases in fuel, energy, food etc we have seen in 2008 fall out of the equation (inflation is measured over a rolling 12 month period). So, with inflation not expected to be problematic in 2009, and an economy in recession, it gives the BOE a green light to slash interest rates and get us consumers out spending the money we save on mortgages etc. This is why the government have been putting so much pressure on Lenders to pass the reduction in interest rates on to us consumers, otherwise the rate cut would have no impact on the economy as we would have no extra money to spend. Lenders have been reluctant to pass on rate cuts (namely the last 0.5% one), as the rate THEY have to pay to raise money to lend out as mortgages is still high (c. 6%), so if they have to pay 6% to lend the money, they are reluctant to lend it out to consumers at a rate less than this. This is one of the end results of the credit crisis, inter bank lending has ground to a halt, and raising money for banks at the moment is both difficult and expensive. So with rates at 3% now, its the first signal that the BOE expects us to spend our way out of recession, so dont be surprised if rates come down further still. I wouldnt expect anything next month, but in the first couple of months of 2009 if growth has now shown signs of recovering, they could come down by anything up to another 1%.
Now I'm goin the pub......[:D]

[go_4_broke]

Or in other words, money from the banks to you via government order, and if your are in an IVA, straight back to the bank again. Neat if nothing else.

[kallis3]

The way I look at it is, being in an IVA is my own fault, so if I get any extra money and have to pay some of it back to the creditors, then so be it.