Brokers have questioned the benefit of the Bank of England base rate cut to borrowers as new data confirms many lenders raised their rates just before the cut, while fewer than half have passed on the reduction to SVR customers.
Last week Moneyfacts said that several lenders raised their rates ahead of the 4 August Bank decision (see table below).
Moneyfacts finance expert Charlotte Nelson says: “The average two-year tracker rate has been reduced by 0.19 per cent. However, shockingly, some providers, preempting the announcement, chose to increase their variable rate products, meaning the reductions have been offset.”
Bank governor Mark Carney said lenders had “no excuse” not to pass the cut onto borrowers.
Chadney Bulgin mortgage partner Jonathan Clark says: “Although there were clear indications that the MPC were going to drop rates, I was disappointed to see lenders increase tracker rate margins in the week before the announcement.
“This, coupled with many of them dragging their feet when it came to adjusting their SVRs means that many borrowers will simply not feel the benefit of a little more cash in their pockets, as Mark Carney and his colleagues intended.”
But others defended lenders’ actions.
London Money director Martin Stewart says: “They have been hammered enough by low base rates. I don’t think it is up to anyone to tell a bank how to price money.”
Santander says the base rate cut has benefited its customers. It says it has passed on the full reduction to SVR borrowers. It also says it has not cut savings rates by more than the base rate reduction.
Nationwide says its existing borrowers have benefited from the base rate cut and it has made a number of price reductions across its product range. Coventry also says it passed on the cut to existing borrowers and says it has been reducing mortgage costs for new borrowers consistently over recent years.
A spokeswoman for Halifax and Scottish Widows says: “We continually review our rates in line with the market and competitors.”
TSB says its rate adjustments may be “up or down, and are influenced by a range of factors,” while an RBS and NatWest spokesman says its rate changes reflect “market conditions, competitor offers and our demand for business across our mix of products.”
A Virgin Money spokesman adds that its pricing reflects “prevailing hedging costs, interest rate risk, funding, risk appetite and overall market pricing” He adds: “That is why mortgage rates are around 150bps lower today than they were two years ago, despite base rates not moving until last month.”