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18 Oct 2019

News

Bank of England base rate update

Michelle Slade, analyst at Moneyfacts.co.uk, comments:

Mortgages

“So far just 14 lenders have announced their intentions with regards to their SVR’s with the majority passing on the full 0.50% cut.

“Nationalised lender Northern Rock has passed on just 0.15%, leaving its SVR standing at 7.34%, one of the highest on the market. The handful of lenders with a higher rate have yet to announce their decision.

“Many Northern Rock customers would have hoped for some relief in their repayments following the base rate cut, so will be unhappy that the government-backed bank has not set an example and passed on the full 0.50% cut.

“Customers looking for a new tracker deal will also be disappointed after Abbey, NatWest and Royal Bank of Scotland increased rates by 0.50%, effectively wiping out the base rate cut.

“Lenders are taking nearly three times more margin for risk than they were a year ago. Today the average two year tracker rate is 1.85% above base, a year ago it was 0.68%.

“Hopefully as more lenders announce their revised rates this will be reduced, but not if more lenders follow the example set by Abbey, NatWest and RBS.

“The base rate cut and bank rescue is intended to free up the markets. However, it may be a couple of weeks before lenders regain and real appetite to lend.

Savings

“Just 12 providers have announced cuts to their savings products, with most passing on the 0.50% to their tracker products. However, this is not unusual as most providers tend to announce their full rate changes a few weeks after any base rate announcement.

“It is fixed rate bonds which have seen the biggest impact, with numerous providers withdrawing their products and launching new ones paying reduced rates. Many providers are also offering reduced terms, a move which shows they are worried about short term funding as opposed to long term.

“Earlier this year Moneyfacts best buys were full of deals 7% and over, but now only two providers, Anglo Irish Bank and ICICI Bank UK are offering rates at this level. Savers should get in quick to take advantage of these rates as it is unlikely they will be around for long.

“Rates remain uncharacteristically high at the moment, but as things improve in the money markets and liquidity returns, we will likely see rates returning to similar levels being offered when base rate was last at 4.50%.”

 

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry. 

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