Homeowners will not necessarily benefit from rate cuts
Recent reports have indicated that despite the base rate cuts that have been applied by the Bank of England over the past few weeks some homeowners may not actually benefit from these reductions, as many lenders have not passed the rate cuts on. The central bank is expected to cut rates further next year, but some feel that many of the major UK banks will ignore the reductions and fail to pass them on.
Another factor that has been brought to light is that whilst the base rate may mean lower borrowing costs for some borrowers depending on which banks pass on the base rate cuts many others will find themselves penalised as the interest rates paid on savings accounts are quickly cut, giving savers lower returns on their savings, and resulting in those with borrowing and savings often losing out twice.
One official said: ‘Both borrowers and savers have been penalised following the last base rate cut. It is hard to believe that it will be any different if the Bank cuts the base rate again today.’
It has been noted also that whilst some lenders are very slow to act when applying cuts to borrowing rates many are very quick to act when it comes to reducing the rate on savings accounts. Some officials are convinced that by next spring the base rate could fall as low as just 1 percent.
However, lenders may not pass this on, which could create problems at a time when many will be struggling financially. The Prime Minister and the Chancellor of the Exchequer have both urged lenders to pass on the recent and future base rate cuts to assist borrowers and boost the economy.
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It is always essential to speak with an independent financial advisor when looking to refinance your home. This is especially true if you have High value mortgages which need to be looked at in considerable detail.