One year ago this month the Bank of England ended six months of dramatic rate cuts leaving Bank of England Base Rate at a record low of 0.5%. But what has happened since?
Analysis from moneysupermarket.com shows the winners and losers from this static rate.
Hannah-Mercedes Skenfield, mortgage expert at moneysupermarket.com said: “Undoubtedly the biggest winners from the fall in interest rates have been those consumers who have been sat on standard variable rates (SVRs). Traditionally lenders’ SVRs have usually been higher than the deal that was ending so consumers would have to remortgage as a result. Now we have a situation where many consumers are sitting on extremely low rates and have no incentive to move. We have started to see SVRs starting to increase again, and rates for remortgaging starting to fall so for some consumers, now is the time to consider looking for an alternative deal.
“The losers have been those consumers who have little equity in their property or those who have been looking to get a foot on the housing ladder, particularly first time buyers. There have been some positive signs in the mortgage market over the last 12 months; we saw the number of available mortgage products fall below the 2000 mark in 2009 but we have seen a steady increase since with numbers in excess of 2,700 which shows that the recovery in the market is in place, although it is a way short the height of 2007 when there was over 30,000 products. In addition, those who are even able to access a deal with an LTV of 90 per cent will have found themselves paying a hefty premium for the privilege, often as much as 6.05 per cent.
“Lenders have benefited from a low LIBOR and after a period of inactivity they are starting to loosen their purse strings and pass on some of these benefits to consumers in terms of lower rates. Borrowers need to be wary though as some lenders have introduced products with low ‘headline’ grabbing rates only to charge high fees which make the mortgage less competitive compared to products with higher rates. There are some good deals in the market at the moment so borrowers should consider fixing before rates start to rise again.”