Northern Rock Has Passed On A 0.25% Cut To Their Standard Variable Rate

I know a lot of my readers take particular interest in Northern Rock and their standard variable rates, so I thought i’d just give you folks a quick update.

I received a letter a few days ago from Northern Rock, informing me that they are going to pass on a 0.25% cut to their standard variable rate from the 1st of Feburary.

I THINK that’s from the 0.50% base rate in January 2009. But it could be from the cut back in December. I’m not entirely sure, but the point is, Northern Rock’s SVR has officially been reduced.

The SVR was 5.34%, but has been reduced to 5.09%. Pretty sweet.

How much am I saving?

Before the cut, my monthly payments were £607.60. But now my monthly payments have reduced to £578.40. A saving of approximately £30.

Ok, it’s not much, but it’s better than nothing.

Mortgage Overpayments

While the amount of interest has reduced, i’m actually still paying the same amount each month. I’m paying &pound800 per month because I arranged to make overpayments at some point last year. That’s the entire rent, going towards the mortgage. The interest rate cut just means i’m paying off more actual debt, and paying less interest on the debt.

I’m trying to reduce as much debt as possible while debt is cheap. Eventually rates are going to go back up again, that’s a certanty. I personally believe saving money at the moment is pointless because interest rates are so low. My money will work a lot harder by reducing debt, than if it were to gather dust in a savings account.

So, what YOU say, my fellow Northern Rockers?

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Talk / 7 Comments left so far

Fiona L wrote this on 2009-01-29 12:40:16 ooooooooooo That is good news, not amazing news but its better than a slap in the face.
:) 1

The Landlord wrote this on 2009-01-29 13:37:43 All adds up, that's for sure :) 2

Daniel Harrison wrote this on 2009-02-03 16:39:47 Yeah, overpaying off the capital when you can afford it at the moment will help keep costs when rates do go up again. Given that interest is a pure cost, i.e. 'wasted' money, it's well worth paying as much as possible.

Got one question for you... when you make a profit from letting a property, that profit is taxed at standard income tax levels (20 or 40%)? Anything else? like class 4 NICs?

(BTW, your site is a great resource, cheers!)

Cheers!
Dan 3

The Landlord wrote this on 2009-02-03 18:22:58 Hey Daniel,

Yup, the profit should get taxed at standard income level- capital gain tax (CGT). More about that over at Tax On Rental Income (CGT)

But if you have multiple properties, it might be worth registering yourself as a property letting company, and then you can get the advantages of other tax reductions. It can get really complicated then, in which case I advice seeking professional advice from an accountant :)

Hope that helps.
Many thanks! 4

Daniel Harrison wrote this on 2009-02-03 19:12:15 Sorry, not quite that clear! I've only got 1 property, my flat which I am letting out whilst living with my gf.

So is it Income Tax paid on rental income? Or CGT on rental income?

DirectGov suggests it's Income Tax.
http://tinyurl.com/3m55cy

Cheers
Dan 5

The Landlord wrote this on 2009-02-03 20:09:14 Ahh sorry, I confused myself then also ha.

The money you make from rental income should be taxed by normal income tax levels. If you sell the BTL property, the profit should be taxed at capital gain tax levels.

Sorry, I replied to your question quickly as I was leaving work. Hope that makes more sense!

:) 6

Daniel Harrison wrote this on 2009-02-03 20:11:01 Yep, that completely makes sense now... especially as it matches what I thought. :) Cheers! 7

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