Lenders’ SVRs reflect one-third of base rate cuts

| February 20, 2009 | 0 Comments
Lenders' SVRs reflect one-third of base rate cuts

The resistance of mortgage lenders to pass on cuts in the base rate is illustrated by new research from Moneyfacts.co.uk.

The financial website found that Standard Variable Rates (SVRs) are down by an average one-third of the total amount shaved off the base rate in recent months.

The firm’s analyst, Michelle Slade, points out that customers with new tracker rate loans are likely to reaping the benefits, while those on fixed or SVR deals could be paying interest at between two and three times base rate.

Ms Slade adds that: “Rates for new borrowers need to fall much further to motivate borrowers on an SVR to remortgage onto a new deal or even to trade up the property ladder.”

With further cuts in the base rate possible this year, tracker loans appear to be the most attractive option for homeowners and first-time buyers.

However, Moneysupermarket.com recently warned that lenders’ margins on such loans are rising.

According to the price comparison website, in October of last year when the base rate stood at 5%, the average margin on a new tracker mortgage stood at 0.76%, whereas today’s margin is typically 2.36% above base rate.

With the base rate at 1% lenders can still offer attractive deals but the rate will inevitably rise at some point in the future.

Moneysupermarket’s head of mortgages, Louise Cuming, therefore suggests that trackers should be seen as “handle with care” mortgages because borrowers need to ensure they can afford higher repayments when that time comes.

Tags: , , margins, , , , , ,

Comments (0)

Trackback URL | Comments RSS Feed

There are no comments yet. Why not be the first to speak your mind.

Leave a Reply

Visited 3573 times, 3 so far today