Consumer group Which? has today accused mortgage lenders of not passing on interest rate cuts to borrowers. Its research found that 95% of mortgage lenders failed to fully pass on cuts in the Bank of England base rate after it was cut from 5% to its current level of 0.5% between October 2008 and March 2009.
Since then, more than a fifth of lenders have increased their Standard Variable Rate (SVR), despite no change in the Bank of England rate.
The average SVR, according to Which?, is now 3.48% above the base rate, compared with 1.95% in September 2008 and the highest SVR around is 6.08% from KRBS (previously known as Kent Reliance Building Society).
Which? also warns that many borrowers, unable to remortgage to a better deal due to insufficient equity or income, will face financial difficulty when interest rates finally rise.
In an article on the BBC, L&C’s David Hollingworth said today that homeowners should brace themselves for higher monthly mortgage payments when the Bank of England starts to push up interest rates.
"I think lenders will look to push up standard variable rates by more than any base rate increase," he warned. "That's where vulnerable borrowers really stand to lose."
For the time being however the Bank of England rate is likely to remain at its all time low of 0.5% for some months to come. The Bank of England’s Monetary Policy Committee today released the minutes from this month’s rate-setting meeting and they showed that 7 out of the 9 committee members voted to keep rates on hold at 0.5%.
The good news for borrowers is that the current low interest rate environment means that there are some very competitive mortgage deals available for those looking to switch to a better rate.
Whether you’re happy sticking with a variable rate but want to move to a deal that directly tracks the Base Rate, as opposed to one linked to your lender’s Standard Variable Rate, or you’d prefer a fixed rate mortgage to protect yourself when rates do eventually rise, there are good deals to be had.
To see how a rise in interest rates would affect your monthly mortgage payments, try our rate change calculator To quickly see if you could save money on your current mortgage deal, try our 1 minute mortgage check