Nearly half of mortgage lenders have failed to pass on to their variable rate borrowers the benefits of the Bank of England’s base rate cut, flouting Bank governor Mark Carney’s warning that they had “no excuse” not to do so.
The Bank’s quarter-point cut to its base rate on August 4 was expected to prompt many lenders to trim monthly interest bills for borrowers on standard variable rates or other floating rate deals. Research by finance website Moneyfacts.co.uk found that, a month on, nearly half have yet to react.
Charlotte Nelson at Moneyfacts.co.uk said it was a mixed picture for borrowers who had anticipated they would be left financially better off by the move.
Charlotte Nelson at Moneyfacts.co.uk said it was a mixed picture for borrowers who had anticipated they would be left financially better off by the move.
“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,” she said.
Ms Nelson said average tracker rates had fallen by 0.19 percentage points, but added that some lenders had raised the rates on tracker deals in anticipation of a base rate cut, in order to offset later cuts.
“To illustrate this, at the start of July the average two-year variable tracker rate stood at 2.01 per cent. This had increased by 0.12 per cent on August 1, therefore reducing the effect of the reduction in the month of August to 0.07 per cent in real terms.”
Fixed rates deals are still some of the best on offer, regardless of short term future changes to base rates. Moneyfacts said a borrower with a £200,000 mortgage over 25 years would be £243 better off each month on an average two-year fixed rate — currently 2.46 per cent — compared to an average standard variable rate of 4.71 per cent.
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