Many mortgage lenders are to cut standard variable rates (SVRs) following the Bank of England decision to cut the base rate from 5.5 per cent to 5.25 per cent yesterday. This is the second 0.25 per cent rate reduction in three months.
While many mortgage lenders
were criticised for failing to lower rates after the December cut, the majority of providers said within hours of the monetary policy committee's decision that they planned to pass on the lower rate to consumers.
Council of mortgage lenders (CML) director general, Michael Coogan, says: "This is good news for the quarter of UK borrowers on tracker rates who will see an imminent reduction in rates.
"However, borrowers should not expect that a base rate reduction will automatically result in a cut in standard variable rates or discounted rates across the market."
Of the top ten lenders, only Northern Rock decided not to introduce the 0.25 per cent drop. "Lenders’ rate setting policies are more complex than simply the level of the base rate," explains Mr Coogan. "They are determined by a range of factors including the cost of retail funding and the cost and availability of wholesale funding."
Lenders who have confirmed they will pass on the change include Abbey, Coventry BS, First Direct, Halifax, HSBC, Lloyds TSB, Nationwide, Natwest/Royal Bank of Scotland and Woolwich.
Senior technical manager at John Charcol, Ray Boulger, says: "The bad news for the UK’s mortgage borrowers is that bank rate cuts have increasingly less of an influence on their pockets, at least in the short term.
With 55 per cent of borrowers on a fixed rate mortgage
, lenders performing a double-whammy in choosing not to pass on the bank rate cut in full on their standard variable rate and also increasing the margin over Bank rate on their new tracker mortgages, this cut will have limited impact."
There have also been reports that, anticipating the rate cut, many mortgage companies – including Nationwide and Halifax – recently increased rates before appearing to slash them for the benefit of consumers. Therefore, the most recent cuts will have no real effect on many homeowners' rates.
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