Lenders Rush To Cut Rates

The Bank of England’s latest rate cut on Thursday send mortgage lenders into a frenzy of mortgage rate cuts – great news for borrowers.

On the afternoon of the rate cut nine out of the top ten lenders had said that they would pass on the full rate cut to borrowers. Of the top ten lenders, only Northern Rock did not shift its rates – and that can’t be a great surprise in the bank’s situation.

The banks’ alacrity to cut rates contrasts sharply with the attitude taken after the last BoE rate cut in December. Since that cut many banks and building societies failed to pass on the full cut, and some rates were even raised before the February cut. Some 20% of lenders failed to pass on the full December decrease.

On a mortgage of £150,000 the rate cut of 0.25% will save £24 on monthly repayments.

Mortgage expert from broker John Charcol, Ray Boulger, said: “They have rushed to deflect any criticism.”

Lower mortgages will come as welcome relief to those consumers who benefit, as other bills show little sign of coming down. Fuel, energy and food bills are all likely to push up the rate of inflation in the coming months.

Mike Naylor of the comparison website uSwitch.com said: “The rate cut could still be too little, too late, for some. People are currently paying out 35% of their take-home pay on remortgage repayments, and ten million consumers already feel that their current level of overall debt is unmanageable.”

The mortgage rates cut will unfortunately help only a minority of borrowers, about 20%, who have a mortgage with a variable interest rate. Around half of all homeowners have a fixed-rate loan which will not be affected. Anyone who recently fixed their mortgage at 5.5% or higher will be a loser at this time.

The widely forecast rate cut will also not be good news for savers, who outnumber borrowers by about eight to one.