A distinct lack of interest

Homeowners hoping to gain from the surprise cut in the Bank of England base rate last week should not celebrate too soon. They may not benefit fully from this or future cuts.

Some lenders, including the One Account, immediately dropped their rates in line with the Bank's full 0.25 per cent cut, but brokers doubted if all of them would follow.

David Hollingworth of the Bath firm London & Country said: 'A lot of lenders did not pass on the full cut last time. I'd be astonished if they do.'

Lenders in the HBoS group, including the Halifax and Intelligent Finance, said on Friday they would reduce their standard rate by a token 0.1 per cent.

Some banks and building societies have put 'collars' on their discounted and base rate tracker loans to prevent borrowers paying much less. The Halifax has reserved the right to alter the tracking differential - the gap between the base rate and the level its borrowers pay, if the base rate falls to 3 per cent. Abbey National has set a floor of 1 per cent on its tracker mortgages.

Derbyshire Building Society has a collar of 3 per cent on all its discounted loans, while the Darlington society has a collar on all its products set at 0.5 per cent below the base rate at outset minus the discount.

London & Country's Hollingworth says his firm tends not to recommend such deals, believing it unfair that lenders expect borrowers to take the risk of rates rising, but are not ready to accept them falling below a set level.

There are plenty of other good offers, however, particularly if you want to fix your interest rate at an ultra-low level for a few years.

Fixed rates may become cheaper in the next few months, but Simon Jones of mortgage broker Savills Pri vate Finance says hard-up people who are able to remortgage without a penalty should switch loans now.

The Newcastle has mortgages fixed at 4.35 per cent for five years,a rateJones describes as stunning. Interest will be calculated daily, you can borrow 90 per cent of the value of your home and the early redemption penalty during the fixed period is 5 per cent. A £345 application fee is charged on advances of up to £250,000.

Savills also recommends Portman loans fixed at 4.14 per cent for three years. The maximum is 95 per cent of a home's value, and there is a £300 application fee.

Hollingworth likes Britannia's two-year fix at 3.74 per cent with a £495 arrangement fee, or 3.84 per cent with a £295 fee. Both loans carry exit fees during the two-year fix.

For those whose finances could stand higher interest rates and are tempted by the potential of a further cut, the Coventry Building Society offers loans discounted by 2.1 per cent until September 2005, producing a current rate of 3.65 per cent. There is an application fee of £295 and the maximum loan is 95 per cent.

If you could do with some help with the costs of remortgaging, however, you may prefer to pay slightly more for a Portman mortgage discounted for two years by 1.86 per cent, producing an initial rate of 3.79 per cent. The application fee is £300, but the legal work and valuation are free.