Most mortgage lenders HAVEN’T even passed on last week’s Bank of England base rate cut to customers – we reveal the ones that did
- The Bank of England cut base rate twice in as many weeks, now to 0.1 per cent
- This means lenders can now borrow money more cheaply than ever before
- Despite this just 12 mainstream lenders from 87 have passed on last week’s cut
The majority of mortgage lenders had yet to pass last week’s base rate cut onto their customers, even as another one arrived.
Yesterday the Bank of England took the unprecedented step of cutting interest rates to 0.1 per cent to help battle the financial effects of coronavirus.
This followed an emergency move last week which saw the base rate cut by 50 basis points from 0.75 per cent to 0.25 per cent.
This, combined with new schemes to boost lending, means that banks will now get funding from the Bank of England at a cheaper rate than ever before in modern history.
Banks can borrow money from the central Bank at a cheaper rate than ever before in history
But research has revealed just 12 banks and building societies have so far passed last week’s cut on to customers.
This is out of the 87 mainstream financial institutions currently offering mortgages in the UK, according to finance experts Moneyfacts.
Usually, a drop in base rate will see a corresponding drop in a lender’s ‘standard variable rate’ – the rate borrowers’ loans revert to once their fixed rate periods come to an end.
But the majority of lenders have kept their standard variable rates at the same level as before the Bank of England’s original cut.
Meanwhile, there has been a distinct lack of movement in the best new fixed rate mortgage deals, as This is Money revealed yesterday.
At the time of publication, only Bank of Ireland, Barclays, Danske Bank, Dudley Building Society, Halifax, Lloyds, Metro Bank, Nationwide, Platform, Post Office for Intermediaries, Santander and TSB have passed on the first cut.
All of these lenders cut their standard variable rates by 0.5 per cent. Santander swiftly moved to confirm yesterday that it would also pass on the second 0.15 per cent shift down from a 0.25 per cent base rate to 0.1 per cent.
(All reduced by 0.50%)
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Eleanor Williams, financial expert at Moneyfacts, said: ‘It seems that the majority mortgage providers were still deciding if and when they will pass on the base rate cut from 11 March to their standard variable rate, when the next base rate cut of 0.15 per cent was announced on 19 March.
‘The expectation has usually been that the majority of providers would eventually reduce their standard variable rate by the full base rate cut.
‘Historically this usually filters through after the larger mortgage providers have published their intentions.
‘It is too soon to tell if mortgage providers will pass on this latest further base rate cut of 0.15 per cent to their standard variable rate as well, but they may all agree that passing on the cut is the right thing to do under the circumstances.
‘Margins on new borrowing rates are currently very narrow, so it will be difficult to see if the total accumulation of both base rate cuts will filter down to new mortgage lending rates.’
Nationwide pulled its tracker deals after the Bank of England’s move on base rate yesterday
In theory, mortgage holders with tracker deals – deals that track base rate directly – should see a slight reduction in their monthly bills as a result of the Bank of England’s emergency action on interest rates.
But this might not be the case for new customers taking these deals.
For example Nationwide raised rates on two-year trackers for new borrowers by 0.15 per cent in response to last week’s cut, then pulled the products completely this week in the wake of the second cut.
And now the building society has temporarily removed them from sale, altogether.
And it remains to be seen whether the cuts will have any impact on the price of fixed rate mortgages.
Overall, the average standard variable rate has fallen from 4.90 per cent before the cut to just 4.84 today, according to Moneyfacts data.
The average two-year fixed rate deal has fallen just 0.02 per cent from 2.43 per cent to 2.41 per cent, while the average five year fix has dropped from 2.73 per cent to 2.71 per cent.
>> Click here to find out what the base rate cuts might mean for your savings
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