Mortgages set to get cheaper, signals bank

The head of the Bank of England has suggested 2008 will see interest rates head downwards – leading to cheaper mortgages for millions

The pain of paying mortgages seems set to ease next year for millions, the head of the Bank of England has signalled, as the problems suffered by banks and other financial businesses make it likely he will cut the UK’s base interest rate up to three times in 2008.

The size of mortgage repayments is heavily affected by the Bank of England’s base interest rate, meaning any cuts will be passed on to people paying mortgages in the form of lower repayments.

Mortgages will fall, believes The Times

According to The Times website, “Interest rates are set to be cut at least twice by next summer — and up to three times next year — to stave off a sharp downturn in the economy, the Bank of England signalled yesterday. ”

Mervyn King, the Bank’s governor, believes that the problems big financial companies are experiencing – a result of the so-called ‘credit crunch’ that saw thousands of worried savers queueing outside the mortgages provider Northern Rock earlier this year – could have an effect on other businesses, including Britain’s high-street shops.

By cutting interest rates – and easing mortgages – Mr King hopes to protect the general public from the effects of other things going on in the economy, like the rising costs of fuel and food.

Mortgages could fall by £15 a week

The Times says that two cuts in mortgage rates of a quarter of one per cent each would shave £47 a month off the repayments on a typical £150,000 mortgage.

The predicted three cuts would knock £69 a month in total off the cost of the same mortgage’s repayments – meaning an extra £15 a week to spare for the typical family.

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