Mortgage lenders rush to cut rates

Within hours of the Bank’s announcement at noon, nine of the top ten lenders said they would pass the full quarter-point cut to their borrowers.  Only the stricken Northern Rock did not move its rates following the decision to bring down rates from 5.5% to 5.25%.  The ‘rush to cut’ follows criticism of banks and building societies for ripping off mortgage holders after the last rate reduction just before Christmas.  About 20% of lenders did not pass on the whole of the December decrease to hard-pressed borrowers.  The rate cut will help only the minority of borrowers, roughly one in five, who have a mortgage with a variable interest rate.  About 50% of homeowners have a fixed-rate loan which will not be affected.

Bank cuts interest rates to 5.25%

The Bank of England cut interest rates on Thursday by a quarter point to 5.25 percent despite calls for a half-point cut.  The widely expected quarter point cut by the Central Bank was modest compared to the recent cuts made by the US Federal Reserve (1.25% points last month alone).  The Bank’s move will be welcomed by many mortgage borrowers, but homeowners who do not have a mortgage deal directly linked to the base rate may be disappointed as some lenders have been increasing their own rates in anticipation of a cut.  The decision by the Bank of England’s Monetary Policy Committee comes as more evidence emerges of a slowdown in economic growth both in the UK and overseas.

Many lenders failed to pass on rate cut

According to figures, eighteen of the 103 mortgage lenders failed to pass on any of last month’s interest rate cut, while sixteen reduced their rates by less than the full 0.25%.  However, many banks and building societies have taken the opportunity of the interest rate cut to reduce their savings by more than the 0.25% reduction in base rates. A total of 117 providers have so far cut their savings rates, with just 15 leaving them unchanged.  Alliance & Leicester has made the biggest reductions to its savings by slashing rates by up to 0.5%, while HSBC has reduced some accounts by up to 0.49%.  Britain’s biggest mortgage lender Halifax and Bradford & Bingley have both cut rates paid to savers by up to 0.4%, while a number of banks and building societies, including Britannia, Royal Bank of Scotland and NatWest, Yorkshire Bank and Sainsbury’s have decreased them by 0.3%.  Will another rate cut mean banks carry on cheating customers even more?

Hurray! Base rate down to 5.5%

The Bank of England has finally reduced the base rate by 0.25% to 5.5% after 5 increases since 2006.  In the past 2 to 3 months, lenders have increased their mortgage rates by as much as 1% or more even though the base rate had not changed.  Lets hope that the BoE’s decision can go some way into easing the present turmoil in the financial markets.  I say, expect further reductions.