Research from Which Money has found that 95 per cent of lenders failed to pass on rate cuts in full on their standard variable rates (SVRs)
Over a fifth of lenders have increased their SVR since the base rate fell to its historic low of 0.5 per cent over two years ago. The only lenders out of the biggest banking groups to pass on the full cut were Lloyds TSB and Cheltenham & Gloucester.
KRBS was found to be the direct lender with the highest SVR at 6.08 per cent, while the lowest was Stafford Railway Building Society at 3.49 per cent.
Which? chief executive Peter Vicary-Smith, said: “Millions of people are on variable rate mortgage deals and for many a rate hike could mean they’re facing real financial difficulties.
“Banks have enjoyed increased margins on mortgages for the last few years and when the base rate rises again, few lenders will be able to justify passing the full amount onto their SVR customers.”
The Council of Mortgage Lenders said that the comparison was unfair: Commenting on market conditions for lenders, CML director general Michael Coogan said:
“Lending rates are fundamentally driven by the cost of funds, not the base rate, although the two were more closely correlated before 2008. But this apparent historical relationship has been blown apart by the move to an unprecedented low base rate since March 2009.
“Since the onset of the financial crisis, firms have been operating in lending and funding markets that have changed dramatically, and we have been reinforcing the message that base rate is not a proxy for the funding costs for lenders.
“For borrowers anticipating difficulty, however, the message remains unchanged. They should speak to their lender as soon as possible if they are struggling to meet their repayments, and lenders are committed to helping them wherever they can do so.”
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