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Rates Cut

Although interest rates were cut for the first time since August 2005 this month (December 2007) borrowers looking for a cheap loan are unlikely to see much change.

When the base interest rate stood at 5.75% last month, the highest rate since March 2001, we had almost got used to seeing loans and mortgages at that kind of level. Slowly increasing rates since July 2006 had become a fact of life. The rate cut we have just seen was expected but perhaps not this soon. Now finance industry experts are predicting a further cut quite early in the new year.

However, even though two major mortgage lenders have said they will reflect the rate cut in their product ranges, that could be just a publicity move, given how quickly it was announced. Other mortgage providers may not be so keen to pass on the rate cut and providers of loans, particularly secured loans are likely to be much more cautious.

Times are still uncertain in the loans industry with different providers announcing restrictions in lending volumes and loan criteria as they slowly begin to understand the real impact of the international credit crunch.

The volume restrictions on loans being arranged mean that, even if someone has found what they think is their cheapest loan option, they may find that their application cannot be fully processed if the loan funds at that rate have already been exhausted.

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