First time home buyers will be delighted with the news as mortgage rates are set to be reduced while savers and those with investments are likely to see a reduction in their returns.
Advertisement
Within the external environment, building societies continue to do what they can to support loyal savers, often paying a slightly higher rate to existing savers with closed issue accounts.
A spokesman for the CML said: ” Average borrowing cost has fallen from 3.8% to 2.9% since the last bank rate cut seven years ago.
Many lenders are still yet to make an announcement on whether they are cutting their interest rate after the RBA’s announcement on Tuesday. It will also be passing on the reduction to mortgage customers on its SVR, with effect from September 1. Lloyds Bank’s SVR rate directly tracks the bank rate and so it will reduce, but Halifax’s SVR does not and its rate is under review. “Neither our SVR nor our savings rates are directly linked to base rate”.
A base rate cut does not automatically feed through on a like-for-like basis to all variable mortgage rates.
“Both of those factors will drop out by the second half of next year, which will see the annual inflation rate pop up to something much more consistent with the 2 per cent target midpoint”.
More than 2.2 million loans across the United Kingdom are SVR deals, according to figures from the Council of Mortgage Lenders (CML).
It is reviewing variable savings rates in the coming days, as well as reviewing SVRs across its brands.
Historically savings rates have tended to be a proportion of the Bank Rate. The 7/1 Adjustable Rate Mortgages have been listed at 3.040% now yielding an April of 3.507%.
Both firms said they were sitting tight and monitoring market reaction before they made their decisions.
HSBC, which has already passed on the cut to tracker mortgage holders but will not pass on the decrease to standard variable rate (SVR) customers until September 1, said its terms and conditions mean the cut for SVR customers is scheduled to start from the beginning of the month.
Advertisement
“In light of the BOE’s decision we are now reviewing our SVR and savings rates across our range and will notify our customers of any changes in due course”, a HSBC spokeswoman said in an e-mailed response to questions today.
