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9 Jul 2020


Mortgage rate cuts reach dead-end

Half of mortgage lenders have failed to pass on recent base rate cuts to their standard variable rates (SVR). There is a strong indication that the majority of these have no intention of cutting their SVR and an even stronger possibility that lenders have reached a plateau and are simply unable to cut rates further.


  • 50% of lenders not passed any cut on from October base rate cut
  • 82% of lenders not passed on the full 1% cut from the last three base rate cuts
  • 57% of lenders passed on just half or less of the last three base rate cuts


Darren Cook, mortgage expert at Moneyfacts.co.uk, comments:

“Banks and building societies are now facing tough decisions in light of news that the Bank of England will take an aggressive approach on future cuts in base rate.

“Historically, the SVR had little relevance in the market, with only a few customers ever needing to revert to this rate and lenders have amended these rates in line with bank base changes.

“However, as pay rates or initial rates on other products have increased in price as a result of the adverse markets, SVRs have become a more viable product option.

“In real terms, most lenders’ current SVRs are underpriced compared to the rest of the mortgage market, with some current products even having a revert rate that is lower than the initial rate.

“Base rate is expected to fall again next week and we could have a situation where even less or no lenders choose to pass on a benefit to their customers, in an attempt, in the short term, to allow falling interbank rates to catch up with their current rates.

“The Libor rate has only fallen by 0.36%, to 5.91%, since the base rate cut on 8 October and indicates that there is still a long way to go before we see any sign of stability in interbank borrowing.

“A consolation is that back in 1990, SVRs were well over the 15 per cent mark, but by contrast even when house prices were falling steeply, banks were seen to have a collective stance and were willing to advance up to 95% loan to values. It could be argued today that the lower mortgage rates and a collective stance on reasonable available maximum loan to value levels may help to bring about a level of stability.”



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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