Mortgage interest rates

Whilst the Bank of England slashed interest rates by a massive 1.5% to 3% last week many of the major banks and building societies have still to confirm if they will heed Gordon Brown's pleas and pass on this rate cut in full.

Some such as HBOS, Lloyds TSB, Abbey, Nationwide and Bradford & Bingley have announced that they will pass the rate cut on in full whilst others such as the Alliance & Leicester are still undecided about how much of a reduction to pass on to their mortgage borrowers.

Most people with tracker mortgages should have received an immediate reduction in their rates but as the rates have become lower some mortgage lenders are starting to point out that they have collars on the rates. Lenders who have collars in their tracker mortgages include Halifax, Nationwide and the Yorkshire Building Society.

These collars effectively dictate that the lender does not have to pass on the full rate cut if it will take the rate below say 3%. The wording has always been there but was never important before as rates were never as low as they are right now. They will become more important in future if the Bank of England reduces rates in future as it is widely expected to do.

If you have a fixed rate mortgage then unfortunately there is no immediate benefit to you but if your tie in period finishes soon this could lead to you being able to save money by moving onto a lower rate.