Mortgage lenders reluctant to lower SVRs

| October 27, 2008 | 0 Comments
Mortgage lenders reluctant to lower SVRs

Financial information provider, Moneyfacts, has reported that the 0.5% cut in the Bank of England’s base rate made earlier this month has not been passed on by three quarters of UK mortgage lenders.

The emergency reduction, to 4.5%, was made on 8th October in a coordinated action with other central banks.

However, only one quarter of UK mortgage providers have responded by lowering their standard variable rates (SVR) by the full amount.

A positive response to the cut is particularly important to homeowners coming to the end of fixed-rate deals.

Many existing borrowers have little choice but to revert to their providers’ SVRs because tight lending criteria mean that those with less than perfect credit histories or small amounts of equity in their properties are excluded from the more competitive deals in the market.

Lenders are scrutinising their customers and at the same time protecting their profit margins.

According to Moneyfacts mortgage expert, Darren Cook, they are loath to lower SVRs because default levels could well rise and interbank lending remain costly.

As the UK enters a recession, the Bank of England is expected to make further cuts in the base rate but Mr Cook warns that future decisions on a rate cut could have little or no bearing on the majority of mortgage repayments.

Moneyfacts research shows that HSBC has retained it pre base rate cut SVR of 6.25%; Northern Rock has reduced its SVR by 0.15% to 7.34%; Beverley Building Society’s SVR is down 0.20% to 6.20% and Nationwide’s down 0.30% to 6.19%.

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