Less than half of lenders have passed on August's base rate cut
Posted 7 September 2016 by Nick Parkhouse
When the Bank of England decided to reduce the base rate one month ago, the Governor of the Bank told lenders they had 'no excuse' not to pass on the cut to their borrowers. However, four weeks after the decision to reduce borrowing rates to their lowest level ever, less than half of lenders in the UK have reduced their standard variable rate (SVR).
Now, new research has revealed that mortgage rates have only fallen by marginal amounts, despite Mark Carney's warning.
Average two-year fixed rate falls by just 0.03% despite base rate cut
Research from financial analysts Moneyfacts has revealed that the majority of lenders have refused to acknowledge the Bank of England's words and have not passed on the base rate cut to borrowers.
Not only have less than half of lenders have reduced their underlying standard variable rate, but two-year fixed rates have fallen by an average of just 0.03% since the 0.25% base rate cut on 4 August. The average two-year fixed rate has fallen from 2.48% to 2.45% in the last month despite Carney telling lenders they had “no excuse” not to pass on savings.
The Daily Express reports that standard variable rates are still 18 times higher than the 0.25% base rate, after falling by just 0.11% over the last month to a typical 4.71%. Two-year trackers have fallen by an average 0.19% from 2.13% at the start of August to 1.94% now. However, many lenders have raised the rates on their tracker deals in anticipation of the base rate cut, negating the 0.25% reduction.
"To illustrate this, at the start of July the average two-year variable tracker rate stood at 2.01%," says Charlotte Nelson from Moneyfacts. "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. 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."
Homeowners urged to take a fixed-rate deal if possible
With millions of borrowers currently sitting on their lender's SVR, experts have urged consumers to take advantage of low-cost fixed-rate deals if they can.
The Express reports that borrowers would be around £243 a month better off based on the average two-year fixed rate at 2.46% compared to the average SVR of 4.71% on a £200,000 mortgage.
Nelson adds: “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.”