Slashed rates sees mortgage drop £1,500 a month to just 1p

24 March 2009 / by Rachel Mason
The Bank of England's decision to slash the base rate down to an historic low of 0.5 per cent means one couple is paying just 1p on their monthly mortgage payments.

According to a report in the Telegraph today, Ben and Nicola Cameron have an interest-only tracker deal with Cheltenham and Gloucester that sees their payments tied at 1.01 per cent below the base rate.

When the couple signed up for the deal in December 2007, the base rate was 5.5 per cent and they were paying around £1,500 a month.

But now, with the base rate down to 0.5 per cent, the couple's monthly mortgage payments in theory should be zero, but due to the fact that Cheltenham and Gloucester's computers cannot cope with payments of nothing, they are being charged the nominal sum of 1p per month.

Although an extreme case, the Cameron's situation highlights the thousands of homeowners who have benefited from falling interest rates.

Since October last year, the base rate has been slashed six times, coming down from 4.5 per cent to 0.5 per cent, thanks to a massive 1.5 per cent cut November, a full percentage cut in December, a further 1.5 per cent cut in January, a full percentage cut in February and a 0.5 per cent cut this month.

Mr and Mrs Cameron, who are expecting their first baby in June, and paid a 20 per cent deposit on their £400,000 property, say they are saving the money that they are not having to pay out on their mortgage to put more equity into their home when their deal comes up for renewal.

"We were incredibly lucky," Mr Cameron, an estate agent, told the Telegraph, "We almost didn't go for it."

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