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Less than half UK mortgage lenders passed rate cut to SVR borrowers

  • 01/09/2016
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Less than half UK mortgage lenders passed rate cut to SVR borrowers
Almost a month on from the first Bank Base Rate cut in seven and a half years, less than half of UK mortgage lenders have handed the full 0.25% interest rate drop to Standard Variable Rate (SVR) borrowers.

On the 4 August, Santander, Barclays and Virgin Money passed the full 0.25% cut to SVR customers. However, data suggests across the market, average SVRs have only dropped 0.9% since before the move.

Plenty of lenders, including Lloyds, have passed the full cut to variable and SVR customers, after Bank Governor Mark Carney’s warning to do so, with Teacher’s Building Society announcing its 0.25% cut today.

However, Carney launched the Bank’s four-year Term Funding Scheme (TFS) as part of a package to support ongoing lending in the face of ‘profitability compression’ after the rate cut, making excuses harder. The shape of the scheme was finalised on 17 August.

The 2.2m existing borrowers on tracker mortgages have benefitted the most from the Bank of England move with two-year trackers falling from an average of 2.13% on 1 August to 1.94% today. However, average two-year fixed rates for new applicants are only 0.3% more competitive.

Charlotte Nelson, finance expert at, said: “While the picture for borrowers isn’t bleak, it is definitely a mixed bag. Borrowers would have assumed that a 0.25% cut in base rate would make them financially better off, particularly if they were on a variable rate.”

She added: “The average two-year tracker rate has been reduced by 0.19%, so borrowers looking for this type of deal would have seen a better picture. However, shockingly some providers, preempting the announcement, chose to increase their variable rate products, meaning the reductions have been offset.”

In mid-August, Lloyds raised its tracker rates 0.25% for remortgagors and purchasers in a move called ‘unwarranted’ by brokers.

Halifax hikes tracker rates in ‘unwarranted’ move following base rate cut

Ahead of the Bank of England’s announcement, a number of mortgage lenders also appeared to pre-empt a reduction to the base rate, with Natwest, Halifax, TSB, Coventry Building Society, Santander, RBS and Scottish Widows Bank all increasing rates on their variable tracker deals, according to Moneyfacts data.

After the Brexit vote on 23 June, in a package of credit support, the Bank’s Financial Policy Committee boosted lending capacity for providers by £150bn after a £5.7bn reduction in capital liquidity buffers which it wanted targeted to keep UK lending stable.

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