The Bank of England have today announced a further cut in UK interest rates. The Bank of England base rate now stands at 2% after a cut of 1% was declared earlier today.

This will immediately affect mortgage borrowers who have tracker mortgages. These types of mortgage track the bank base rate and so are obliged to pass on any cuts, resulting in lower mortgage payments. However, some lenders do impose something called an interest rate ‘collar’. This is effectively a minimum interest rate that they will not go below. All lenders apply this collar differently, Nationwide and Halifax have different collar rates, and some lenders such as Woolwich Barlcays have no collar at all.

Those borrowers who’s interest rate is based on their lenders Standard Variable Rate (SVR) will have to wait for their lender to decide how much of the cut to pass on.

For an interest only mortgage of £100,000, todays 1% reduction means a saving of £83 per month.