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'Era of interest-free mortgages' could be ahead

13 January2009

After dropping for four consecutive months, the falling base rate may usher in an 'era of interest-free mortgages', The Telegraph reports.

Some people with tracker mortgages could find themselves facing an interest rate of zero percent: while most tracker mortgages charge a certain amount over the Bank of England's base rate, some charge a certain amount under the base rate.

With interest rates at an historic low, this places those borrowers in an excellent position. Someone whose tracker mortgage charged 1% below the base rate, for example, would be paying a mere 0.5% today - and one more drop of 0.5% would mean they'd be paying no interest on their mortgage at all.

Should any of those people have an interest-only mortgage, their monthly mortgage payments would drop to nothing.

"Falling mortgage rates are extremely good news for people with tracker mortgages," said a mortgage expert for Think Money. "Many people with tracker mortgages are now paying literally hundreds of pounds less every month - money which we advise them to put to good use, whether that means paying off debts or saving for the future."

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Tags: mortgage, mortgages, tracker mortgage, tracker mortgages, interest rates, base rate, bank of england

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