Some mortgage lenders making money from base rate cuts
Between last December and April of this year the base rate was cut three times, each time by 0.25%. In a surprise move earlier this month, a day ahead of the October Monetary Policy Committee meeting, the Bank of England cut the base rate by a further 0.5% taking it to 4.5%. it was hoped that the rate cut would help to boost consumer confidence and the economy, and would ease financial pressures that were facing many households.
However, recently released reports show that the recent interest rate cut was passed on by only a quarter of lenders, and one campaign group has accused the other lenders of pocketing the money from the base rate cuts.
A number of mortgage lenders, including the nationalised Northern Rock and HSBC, had failed to pass on the rate cut, and the consumer group Which? is now calling for a “a quid pro quo” between banks and lenders.
An official from the consumer group stated: “It’s becoming clear that we’re facing a worsening time in the housing market. As banks are receiving support from the public at large, there has to be a quid pro quo. We think in current circumstances, the consumer deserves a break.”
An official from the British Banker’s Association added: “There is scope to reduce rates to customers.”
Another official said: “Some lenders have announced a reduction in their SVR and have reduced their rate by the full amount. However, a growing number have chosen not to do this and only passed on a proportion of the cut or none at all.”
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