THOUSANDS of homeowners will have hundreds of pounds knocked off the annual cost of their mortgage as lenders recalculate interest rates to take into account last year’s cuts.

Borrowers with annual review mortgages are set to see repayments on a £60,000 mortgage fall by up to £76 a month as they benefit from the two per cent drop in interest rates during 2001.

Annual review mortgage rates do not move with interest rate cuts or rises, but are recalculated at the year end. Some lenders deduct the amount customers have overpaid due to rate changes from the sum they owe.

Most lenders review rates for these mortgages between the beginning of January and April.

Falling rates

Cheltenham and Gloucester said borrowers on its Annual Instalment Review Scheme would see their mortgage interest rate fall to 5.95 per cent from March 1, after being 7.50 per cent since March 2001.

The reduction will knock nearly £60 off monthly repayments on a £60,000 mortgage.

Halifax borrowers should see a significant reduction of around two per cent, with the rate coming down from 7.74 to around 5.75 per cent, leading to a £76.15 reduction in monthly repayments on a £60,000 loan.

However, only a small percentage of Halifax borrowers are still on this rate.

Nationwide is set to reduce the rate for people with a annual review option on their mortgage from February 1 to 4.74 per cent compared with 7.09 per cent in February last year.

Abbey National said borrowers who had formerly held mortgages with National and Provincial, which the group took over in 1996, would also benefit from a fall in repayments when their rate was readjusted.

Around 100,000 customers will see the rates fall to 6.10 per cent this year from 7.74 per cent.

Tweet