0.5% bank rate sees homeowners '£500 billion better off'
Published 29 February 2012 by Lucy Bower
Bank of England figures suggest homeowners are better off by thousands of pounds each following interest cuts.
Figures from the Bank of England suggest that British homeowners have saved over half a trillion pounds in mortgage payments because of record low interest rates, reports The Telegraph.
The Bank of England's monetary policy committee began lowering interest rates at the end of 2007 to combat the effects of the financial crisis. Since then, interest rates have remained historically low. This has brought borrowing costs down, but also has an effect on how much interest savers can earn on their money.
It's suggested that the gain is equivalent to around £50,000 per homeowner, but it's suggested that this amount is balanced out by the amount savers have lost out on.
Data from the Bank reveals £1,328 billion in interest was paid by mortgage holders in the three years running up to December last year. In the three years before that, before the Bank cut interest rates, mortgage interest payments totalled £1,897billion meaning £569 billion less interest was paid following the Banks' actions, saving an average of £50,820 for each of Britain's 11.2m mortgages.
However savers have lost out, who received £975 billion in interest in between January 2006 and December 2008. In the following three years, their income collectively fell by 479 billion.