Just hours after the Bank of England announced that the base rate was being cut by 0.25% earlier this week the majority of top mortgage lenders in the UK announced that they were cutting their mortgage rates and passing on the full rate cut to variable rate borrowers, according to a recent report. Nine out of the ten top mortgage lenders – with the exception of the ailing Northern Rock – announced that they were cutting their mortgage rates, which will come as welcome news to many borrowers with variable rate mortgages.
It is thought that the reason for the rush on cutting interest rates is the criticism that was faced by many banks and building societies after the last rate cut in December, where around 20% failed to pass on the full rate cut to borrowers despite the financial strains that many homeowners were facing due to higher mortgage repayments.
One industry professional stated that lenders were trying to avoid this sort of controversy this time around, adding: ‘They have rushed to deflect any criticism.’
However, some experts state that the rate cut has come too late, and that homeowners will have any benefit from the rate cut reduced by higher costs such as energy bills, food prices, and petrol costs.
One official stated: ‘The rate cut could still be too little, too late, for some. People are currently paying out 35% of their take-home pay on mortgage repayments, and ten million consumers already feel that their current level of overall debt is unmanageable.’
It is thought that around one in five homeowners will benefit from the rate cut. Those on fixed rate mortgages, estimated at around 50% of homeowners, will not see any benefit from the rate cut.
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