Bank cuts base rate, but lenders raise mortgage rates

Yesterday’s cuts in the Bank of England’s base rate, intended to help prevent the slide towards recession, were immediately undermined as lenders increased mortgage rates.

The third cut in the base rate since December will bring relief to the estimated six million home owners with tracker and variable rate mortgages, helping them save more than £30 a month on a £200,000 mortgage.

However, those on cheap fixed-rate deals which are due to expire this year may face financial difficulties.

Nationwide and Alliance & Leicester are among a number of lenders who increased their fixed-rate offers by up to 0.35 per cent.

“Many lenders are yet to pass on the recent base rate reductions – instead they are busy increasing rates, demanding larger deposits, tightening lending criteria and, in some cases, withdrawing deals from the market altogether,” commented Ann Robinson, director of consumer policy at uSwitch.com.

However a number of big lenders including Halifax, Nationwide, the Woolwich, Cheltenham & Gloucester and First Direct announced within minutes of the Bank’s decision that they would cut their standard variable mortgage rates by 0.25 per cent.

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