Rate cuts not reflected by mortgage rates
November 30, 2008
According to a recent report mortgage interest rates do not reflect base area cuts, with officials stating that the UK’s major banks do not seem to be in any great rush to pass on recent interest rate cuts to their customers. The base rate has plummeted to just 3% recently following a huge 1.5 percent rate cut earlier in the month, which has nearly halved the base rate compare to this same period last year, when it stood at 5.75 percent.
The rate at which banks lend to one another has also plummeted according to reports, but professionals claim that the rate at which mortgages have fallen have not reflected this base rate fall and the fall in interbank lending rates. The rate on the average fixed rate mortgage has fallen by just 0.27 percent whilst the actual bas rate has plummeted to nearly half of its original level.
One industry official said: “The lenders have been blaming the high costs of funds in the money markets for not bringing rates back down, but these rates have now started to fall. Mortgage rates are not following suit, even though the margin between bank base rate and LIBOR is less than it was before the October cut.”
Borrowers that are looking to take out a mortage are advised to shop around and compare rates from a range of different lenders, as the rate of interest charged on different mortgages can vary widely based on the lender and the deal that you opt for.
Some lenders have said that they will be passing on the most recent interest rate cut, but there are some that have not passed on the rate cut, which could spell bad news for borrowers that are hoping to enjoy reduced payments.
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