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Base rate cut sees 1500 tracker mortgage customers in dreamland

The 0.5% cut in UK base rates has thrown up the intriguing prospect, soon to be a reality, that 1500 Cheltenham and Gloucester tracker mortgage customers will be paying no interest on their mortgages next month. When the mortgage agreements were initially launched into the market the rate charged was set at 1.01% below base rate which effectively means 0%. However, in the short term the Lloyds Bank group (the owners of Cheltenham and Gloucester) computer system is unable to cope with a 0% interest and this has been set at 0.001% which means just eight pence interest a month on a £100,000 mortgage.

While many mortgage holders may be rubbing their hands in the hope that rates will fall further and effectively the banks will need to pay them interest, this will not happen as many tracker mortgage instruments are capped at 0%. However, for those now paying eight pence interest a month this will take a substantial amount of pressure off their shoulders as disposable income becomes rare in the UK.

It will be interesting to see how quickly the other mortgage companies are to pass on the UK base rate cut as their margins continue to fall although as yet interest in new mortgages has yet to materialise.

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