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06th November 2008

CONSUMER COUNCIL SAYS INTEREST RATE CUT MUST BE PASSED ON FAST TO MORTGAGE CUSTOMERS

The Consumer Council has welcomed today’s 1.5 per cent cut in interest rates and urged all mortgage lenders to pass it on to consumers immediately.

Alison Donnelly from the Consumer Council said, “Consumers are in desperate need of a break and this interest rate will provide some much needed relief.  And with only seven weeks until Christmas it couldn’t have come at a better time.  If this 1.5 per cent cut is passed on, a household with a £100,000 mortgage could save as much as £125 per month depending on what type of mortgage they have[1].  This is a significant saving that could make a huge difference to consumers who are just about keeping their heads above water. 

“Anything that can ease the pressure on consumers’ pockets must be welcomed.  We are calling on all lenders to immediately pass these cuts onto consumers who are already on the edge.  We commend First Trust for being the first of the big four local banks out of the blocks to pass on this reduction to their mortgage customers.  People are paying £33 more per week[2] for essentials such as food, fuel, heating and mortgage compared to this time last year.  House repossessions went up by 59 per cent between April and June[3].  We know that an average household has to find an extra £864[4] a year to pay the interest on their mortgage this year compared to last year[5].  

“Since August this year we have been calling on Government, business and banks to do everything to share consumers’ pain from the rising cost of living.  This is a prime opportunity for them to take leadership and seize this opportunity to give their customers a break.”

ENDS

  1. Consumer Council media contact: Paula Gunn, telephone, 028 9067 4816 or e-mail, [email protected]
  2. The Consumer Council is an independent consumer organisation, working to bring about change to benefit Northern Ireland’s consumers. The Council campaigns for high standards of service and protection and a fair deal for all. It also carries out research, gives advice and publishes reports and other publications. It deals with individual complaints about electricity, natural gas, coal and passenger transport.
  3. For more information, visit our website at www.consumercouncil.org.uk



[1] An average household with a Standard Variable Rate interest only mortgage for £100,000 would have paid £579 at the end of September when the interest rate was 6.95%.  Their new payment could be £454.  Source: Financial Inclusion Centre.

[2]This scenario is based on a family of four (man working full time and woman working part time), capital value of house is £115,500 in Belfast, £100k mortgage coming off one  two year fixed rate mortgage in 2006 onto another in 2008, 75% loan to value as at 30 Sept 2006 = 5.1%, average 2 yr fixed rate 75% loan to value as at 30 Sept 2008 =5.96%, own 50 litre petrol car and fill their tank once a fortnight, use two fills of oil (900 litres) per year.  Electricity prices are taken from NIE’s Home Energy Tariff in Nov 2007 and Nov 2008 tariff.  Income figures for 2008 are projected based on National Statistics Labour Market Average Earnings showing that average earnings (excluding bonuses)  rose by 3.6% (based on GB figure as no NI figure available) to end of August 2008.  Income figures (gross median) for April 2007- based on the Annual Survey of Hours and Earnings (ASHE) from the DETI Labour Market Report, Oct 2008; petrol prices are from a fuel price report for average petrol prices in Northern Ireland for Nov 2007 from the AA and 2008 figures are based on average NI petrol figures for 4 Nov from Catalist; oil figures are based on Consumer Council snapshot surveys of average oil prices based on 16 suppliers taken on 3 Oct 2007 and 32 suppliers taken on 5 Nov 2008; mortgage interest charges are from Financial Inclusion Centre for 30 Sept 2008; and rates from Land and Property Services Northern Ireland Oct 2008; food prices are based on average NI spend on food from Family Spending Survey 2007 and research from mysupermarket.co.uk on percentage price increase on 16 Oct 2008 of a basket of 24 staple food items. This model assumes that all other 2008 prices remain constant.

[3]Northern Ireland Court Service

[4] Mortgage (Interest Charges) £864, up 17%

[5]This scenario is based on a family of four (man working full time and woman working part time), capital value of house is £115,500 in Belfast, £100k mortgage coming off one  two year fixed rate mortgage in 2006 onto another in 2008, 75% loan to value as at 30 Sept 2006 = 5.1%, average 2 yr fixed rate 75% loan to value as at 30 Sept 2008 =5.96%. Source: Financial Inclusion Centre.