Mortgage lenders fail to pass on rate cuts to their borrowers

Mortgage lenders are reluctant to pass on the latest cuts in the bank rates to their borrowers, according to new research.

Mortgage borrowers are not receiving the full benefit of cuts in the Bank of England base rate, Moneyfacts has found in a recent survey.

Borrowers are only seeing their mortgage rates cut by around 33% of the reduction in base rates.

Those with standard variable rate mortgages (SVR) are receiving the least benefit from falling interest rates – the average SVR mortgage has only fallen by 0.31% since January although there has been a 1% reduction in base rates.

Two year fixed rate and tracker mortgages have fared better as they have fallen by an average of 0.49% and 0.58% respectively this year.

Some two year tracker mortgages now charge 3.93% AER compared to 4.51% in January, so some good deals are available for those prepared to shop around.

Michelle Slade of Moneyfacts.co.uk, however, comments that “Rates for new borrowers need to fall much further to motivate borrowers on a SVR to remortgage onto a new deal or even to trade up the property ladder.

“As time passes each base rate cut seems to have less of an impact for borrowers and continuing impact on savers. It begs the question; will the Monetary Policy Committee now say, enough is enough?”

If borrowers are now failing to benefit from further base rate cuts, then it does indeed seem that we are nearing the bottom of the market in terms of mortgage rates.