Homebuyers missing out as lenders fail to pass on rate cut

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by Kay Murchie

Earlier this month, The Bank of England reduced its base rate by a quarter of a point to 5.5% but it has been suggested that some homeowners are missing out as lenders are neglecting to pass on the rate cut to its customers.

Melanie Bien of Savills Private Finance, said that many people have not benefited from the Bank’s decision because their lenders are reluctant to pass on the rate reduction to them. Instead, lenders are looking to retrieve some profit margin before the end of the year.

According to the personal finance website, moneyfacts.co.uk, major lenders who have yet to announce any reduction include HSBC, Northern Rock, Skipton Building Society and Yorkshire Building Society.

Most of the lenders who have passed on a cut of less than a quarter point are quite small, among them the Egg internet bank, which has cut its standard variable rate (SVR) by just 0.15% and Saffron Walden Building Society which cut its SVR by 0.19%.

Borrowers on their bank or building society’s standard variable rate (SVR), or with a discount linked to it, will miss out on a fall in their repayments of around £20 a month on an average £130,000 mortgage.

The rate cut was supposed to bring relief to 1.4 million homeowners who will see their fixed rate mortgages expire in the next 12 months. Their monthly bills could soar by up to 60% when they come to find a new loan.

A spokesperson for Moneyfacts said there are a lot of people who have been left in the dark as to whether their mortgage bills are going to fall. Christmas will be a very nervous time for them.

A great many people have discount rate mortgages that are linked to the SVR charged by their mortgage lender. If this SVR doesn’t change then they will not see any decline in their mortgage repayments.

A spokesperson for brokers London & Country, said many lenders would use the Christmas period as an excuse to drag their feet.
Chase de Vere mortgage brokers expect brokers to implement the cuts when the Bank of England announces another quarter point cut.

Peter O’Donovan of Bestinvest said borrowers should consider taking out a tracker mortgage to take advantage of falling interest rates and earlier this month, Ray Boulger, senior technical director and spokesperson for John Charcol, said that tracker mortgages are now ‘coming into their own’ as they usually offer better value than a fixed-rate deal.