Which banks have passed on rate cuts?
Interest rates have fallen by 3% since October, and are expected to continue to fall in the months ahead. Low interest rates sound like good news, but the reality is thousands of mortgage borrowers may not gain much, if any, benefit if their lenders don't pass on the cuts.
For many borrowers, the SVR on their mortgage may have seemed unimportant when they originally took out the loan, as they expected to remortgage elsewhere once their fixed or tracker discounted period ended.
However, house price falls and a reduced supply of mortgages means an increasing number of borrowers have now been forced to sit on their lenders' SVR until things improve.
The table below shows how the biggest mortgage lenders reacted to interest rate cuts:
|Lender||SVR rate cut (after
1.5% November cut)
|SVR rate cut (after
1% December cut)
|Northern Rock||1.5%||under review|
|Britstol & West||1.1%||1%|
|Bradford & Bingley||1.5%||under review|
|Skipton BS||0.5%||0.95% (min)|
|Chelsea BS||1.15%||under review|
|Yorkshire BS||1%||under review|
|Britannia BS||1%||under review|
|Correct as of 05/12/2008|
With a tracker mortgage, the interest you pay is an agreed percentage above the Bank of England’s base rate. As the base rate rises and falls, your tracker will track these changes, and so rise and fall accordingly. If your tracker mortgage is Bank of England base rate +1% and the base rate is 5.75%, you will be paying 6.75%. Tracker rates are lower than lender’s standard variable rate (SVR) and as they are simple products for lenders to design, they usually come with lower fees than other mortgage schemes.
Every mortgage lender has a standard variable rate of interest, or SVR, on which it bases all its mortgage deals, including fixed and discounted rate and tracker mortgages. When special deals come to an end, the terms of the deal usually state that the borrower has to pay the lender’s SVR for a period of time or pay redemption penalties. The lender’s SVR is, in turn, based on the Bank of England’s base lending rate decided by the Bank’s Monetary Policy Committee (MPC). Every time the MPC raises its rate, mortgage lenders generally increase their SVR by the same amount but when the MPC lowers its rate, lenders are often slow to pass this on or don’t pass on the full cut to borrowers.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.