MANY homeowners will be biting their fingernails this weekend as they wait to find out how much of last week's reduction in base rate will feed through to their January mortgage payment.
The 1% slice off the cost of borrowing, pushing the Bank base rate down to levels last reached in 1939, should knock £50 per month off the price of a £100,000 repayment loan, or £83 monthly if you have an interest-only mortgage.
But some mortgage
lenders have already indicated they will not be passing the cut on in full. Halifax Bank of Scotland is cutting its standard variable rate by only 0.25% to 4.75%, although those on tracker loans will see their rate fall by a full 1%. Abbey trackers too are falling by 1%.
Nationwide has taken the unusual step of lowering tracker deals by 1%, which will push borrowers' rates below the effective floor of 2.75%. This followed angry noises from the watchdogs at the Financial Services Authority that such floors or 'collars' might not be lawful. The society has also cut its standard variable rate to 4%.
Many more will announce new rates over the coming weeks, but as following the last cuts when barely a quarter passed on the full reduction to borrowers, most are expected to be miserly.
At the last round they blamed three-month Libor, on which many mortgages are priced, for remaining high. But this excuse is no longer valid after Libor fell dramatically to 3.7%, and it is still sliding.
Even worse hit will be anyone trying to get into the housing market by picking up a bargain. They must typically pay a margin of anything up to 2% or more if they have only a small deposit. Penalising new borrowers in this way must slow any recovery in prices.
In some cases the price of a mortgage is actually rising. Abbey, Alliance & Leicester and Lloyds TSB pulled their tracker loans, with the expectation that they will be replaced with more expensive ones.
So homebuyers' worries are far from over.
Rising redundancies also prompted forecasts that repossessions next year could top the 75,000 annual peak at the height of the last recession. The scale of the threat of soaring homeless numbers was underlined by the Government's launch of a Homeowner Mortgage Support Scheme to enable borrowers who "suffer a temporary loss of income" to stay in their home.
From January, any household suffering a sudden cut in income, perhaps because one earner has lost a job, will be able to roll up interest on loans up to £400,000 for up to two years, although if you have savings of more than £16,000 you are excluded.
This should in particular help two-earner households who would not otherwise be supported by the changes to income support, which will pay interest on the loan for two years after week 13.
But this is not strictly speaking a payment holiday. The debt will roll up and attract interest on top of interest, so the householder will be pushed deeper still into debt.
Industry experts have give then the move a cautious welcome. Punter Southall's John Postlethwaite said: "If you are facing mortgage difficulties, perhaps because you have lost your job, then any help is welcome."
However, he is nervous that this is a crisis postponed rather than a crisis eliminated. "The worry is that we are merely delaying a stock of repossessed properties coming on to the market, and two years down the line this new problem will strike. And if you wanted to be really cynical you could suggest that stopping repossessions at this point stops bad debts hitting the balance sheets of the banks at this particularly difficult point of time."
This view is shared by analysts at Capital Economics, who believe that while the move may slow the house price crash, it might also prolong it.
Property economist Ed Stansfield said: "New measures aimed at limiting the number of people losing their homes are unlikely to bring the housing market correction to an end, let alone bring about a revival.
"But they could help to slow the pace of house price declines next year. However, if that simply extends the housing market correction, it is debatable whether that will bring any net benefits to the wider economy."
Behind the scenes many lenders believe the scheme will have limited impact, because few repossess a family home simply because the breadwinner has lost his or her job. Yorkshire Building Society spokesman David Holmes said: "No one wants to kick someone out onto the streets simply because they have lost their job. We bend over backwards to keep them in their home.
"The important thing is to contact your lender as soon as you experience problems. We already have advisers who call borrowers as soon as they miss one payment and ask them in a very friendly, helpful way whether we can help."
Relationship breakdown is often highlighted as the major cause for repossessions. Indeed, the pattern with the last recession seemed to point to the major victims of repossession being women left on their own with young children. Yet the Government's own figures reveal some interesting trends in causes and reasons for repossessions. Over the past decade, on average 29% of repossessions have been triggered by unemployment, compared with 21% attributed to relationship breakdown.
Since the millennium, however, the numbers kicked out after being made unemployed have fallen, while the number who lose their homes after a partner leaves has climbed to a point where they each account for roughly a quarter of repossessions.
The most brutal lenders are those operating in the sub-prime arena, where a recent court case gave them the right to begin repossession proceedings as soon as payments are missed.
With this new scheme, the Government will use taxpayers' money to make good any loss which a lender suffers if at the end of two years the property still has to be repossessed at a loss.
Lock into savings deals while they lastSAVERS should move quickly to lock into good returns before they disappear. In the next few days institutions will begin cutting what they pay investors to pave the way for rate reductions to borrowers, writes Teresa Hunter.
Indeed, if base rates do keep falling, as is anticipated, to 1% or lower, we could soon reach the position where savers have to pay the bank to keep their money with them, as was the position reached in Japan a decade ago.
You can fix your return for nine months with Bank of Scotland at 5.71%, while Clydesdale Bank has a three-year bond paying 3%. If you cannot lock your money away for so long, it might be worth considering Bank of Scotland's three-month account paying 5.92%.
It has never been more vital to make sure you do not pay any tax on your savings, so always invest via a tax-free Isa, where £3,600 annually can be sheltered from tax. National Savings & Investments also has tax-free accounts. Full details are available from your local post office or at
www.nsandi.com.
Some pensioners who rely on their savings will see their income cut by a third as rates tumble.
Don't rush to buy insuranceAnyone paying insurance premiums to cover their mortgage in the event of not being able to meet the monthly bill because they fall ill or lose their jobs may like to reconsider their cover.
These policies became popular after state support to homebuyers who fell on hard times was cut back in 1995 so that no state help was given towards mortgage payments until they had been out of work for 39 weeks.
But protection does not come cheaply. Borrowers might typically pay £50 annually to protect mortgage payments of £600 monthly for two years.
However, they are advised to wait a few weeks until full details of the new Government scheme are clarified before cancelling cover to make sure they will qualify in full.
