Some borrowers will find they no longer have to pay any interest on their mortgages if the Bank Rate is cut to 1%. The Cheltenham & Gloucester (C&G), one of the mortgage lending arms of Lloyds Banking Group, has 1,500 customers whose tracker deals are set at 1.01% below Bank Rate. At first they will be charged at just 0.001%, to give the lender time to adjust its computer systems. For someone with a £100,000 mortgage this would mean paying 8 pence a month in interest. Then the customers will pay no interest at all, and will be repaid their small overpayment. However, the C&G said it would not go as far as regularly repaying interest to these borrowers – a negative interest rate – as their deals have a “collar” that sets the minimum rate at 0%.
Their computer system cannot accept an interest-free loan. No provision for a zero, rather than negative numbers.