UK banks not passing on interest rate cuts
Many key mortgage products increase despite lowest ever base rate
Britain’s banks have defied the Treasury and Bank of England’s efforts to get them to lessen the burden on households, raising their interest rates on mortgages after the Bank cut the country’s official borrowing rate. Data collected by the Bank shows that the interest rates offered by UK banks to those seeking variable rate mortgages have been lifted, rather than falling in lockstep with the Monetary Policy Committee’s official rate.
It means that for many customers the cost of borrowing has actually risen instead of falling, despite the Bank and Financial Conduct Authority urging banks to pass on the cuts. The Bank cut its official interest rate from 0.75% to 0.1% last month – the lowest level in UK history.
It said that it had various schemes in operation including its Term Funding Scheme, to ensure banks passed those cuts on to customers. However, Sky News analysis based on BoE data can reveal that while banks have subsequently cut the interest rates on offer to savers, they have raised interest rates on many key mortgage products, including variable rate mortgages which usually shadow the official rate.
Of the 13 types of mortgages – from fixed rates to variable rates and trackers – only five, less than half the categories, had been cut following the Bank’s interest rate cuts. Five, including two-year variable rate mortgages for customers with 75% and 90% loan-to-value loans, had actually been lifted following the official rate cut. The other three mortgage rates stayed the same.
The figures fail to reflect the fact that many banks and building societies have also stopped offering tracker mortgages, which shadow the Bank rate more closely.
A spokesperson from banking lobby group UK Finance said:
“Pricing is a commercial decision for individual firms. The rates offered by lenders are not directly linked to Bank of England base rate and depend on a number of factors including the lender’s funding and operating costs and provision for any losses over the life of the loan.”
Article sourced from Sky News website in an article on 8th April 2020 . Original full article can be viewed by clicking link below
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