Around half of mortgage lenders have failed to pass on last month’s Bank of England base rate cut to new customers despite governor Mark Carney telling them they had “no excuse” not to do so.
To help boost growth the Bank of England has cut interest rates from 0.50% to 0.25% – the lowest on record and the first interest rate cut since 2009 when the financial crisis was at its peak.
It was widely expected that this cut would prompt mortgage lenders to reduce their rates accordingly. However, research from Moneyfacts.co.uk has found that around half of lenders have failed to pass on the base rate cut to customers.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said that while the picture for borrowers wasn’t bleak, it was definitely a mixed bag.
She said: “Borrowers would have assumed that a 0.25% cut in base rate would make them financially better off, particularly if they were on a variable rate. However, this is unfortunately not the case, with just under half of providers failing to pass this cut on to their standard variable rate (SVR) customers.
“Given the bumpy road ahead for the economy, some providers are still quite cautious in their reaction to this new turn of events, with many choosing to wait and see to ensure they get the timing right.”
A month on from the base rate cut by the Bank of England the average standard variable rate has only dropped 0.7% to 4.71%.
Two-year tracker rates have fallen from 2.13% to 1.94%, while lifetime tracker rates have dropped from 2.98% to 2.74%. Two-year fixed rates have gone down slightly from 2.48% to 2.45%.
“Shockingly some providers, preempting the announcement, chose to increase their variable rate products, meaning the reductions have been offset. To illustrate this, at the start of July the average two-year variable tracker rate stood at 2.01%. This had increased by 0.12% on 1 August, therefore reducing the effect of the reduction in the month of August to 0.07% in real terms,” said Nelson.
“As rumours start to build about a second reduction to base rate and mortgages are falling to record lows yet again, borrowers and providers alike are questioning how low these deals will actually go,” she added.
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