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Couple with 1p a month mortgage
Sri Carmichael23.03.09
A COUPLE'S monthly mortgage repayments have fallen £1,500 a month to just 1p after the Bank of England slashed interest rates.
Ben Cameron and his wife Nicola snapped up a two-year tracker at 1.01 per cent below the base rate from Cheltenham & Gloucester when they bought their home in December 2007 for just over £400,000.
They only pay interest on their mortgage so have owed nothing to the lender since February when the Bank of England cut the base rate to one per cent followed by a 0.5 per cent cut this month.
The building society today admitted that the couple should in fact be paying nothing on their mortgage but a computer glitch is forcing them to pay 1p a month.
Mr Cameron, 37, whose 28-year-old wife is due to give birth to their first child in June, said: "We feel incredibly lucky - we almost didn't go for it. It was only the third broker we approached who flagged up this deal. We look at our mortgage statements now and they look ridiculous, it's fantastic." A handful of lenders, including Halifax, offered two-year trackers at between 0.51 and 1.01 per cent below the base rate in the last half of 2007.
Ray Boulger, of independent mortgage broker John Charcol, said the estimated 10,000 people who took out interest-only mortgages at those rates are effectively enjoying free home loans.
"They're the last below base-rate trackers we'll see for a considerable time," he said. "Lenders have learned their lessons."
An estimated 30,000 more homeowners are believed to be on zero interest loans but are on repayment schemes so are still paying lenders hundreds of pounds a month in paying off the capital.
Computers at mortgage companies have been unable to process the zero interest. "That's why we're paying one pence," said Mr Cameron, an estate agent. "Cheltenham & Gloucester sent us a letter saying their admin system couldn't cope and they'd charge us a nominal rate of 0.001 per cent, then refund us. We pay them 24p and they pay us back 23p - it seems very silly."
The Camerons, who bought the two-bedroom Victorian cottage in Hampton in Richmond borough with a 20 per cent deposit, have not spent their saved cash.
"We're saving what we were paying when the interest rate was 5.5 per cent," Mr Cameron said. "It has been tempting to blow the extra money on a holiday, but it seemed irresponsible when we're about to become parents and we may be in negative equity because our house has fallen in value."
They will have to move to their lender's standard variable rate at the end of the year. Mr Cameron said: "It's a huge relief to know we can use the money we've saved to put equity back into our home so we can hopefully get a good fixed rate deal."
The most attractive tracker mortgage now on the market is a life-time rate of 2.39 per cent above the base rate from First Direct, available with a 25 per cent deposit.
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