Rate cuts not passed on to mortgage customers yet
Article source: www.yourmortgage.co.uk
As a measure to help streamline the current market situation, the Bank of England made an announcement that came as a welcome surprise when it decided to cut down its Bank Base Rate by half percentage point. The move prompted other banks to follow suit and most of the major banks announced that they too would reduce their Standard Variable Rates by the same half a percent.
Among the banks that took up this challenge are the Halifax Bank of Scotland, the Royal Bank of Scotland, Lloyds Bank TSB, and Barclays Bank Woolwich, which all announced a reduction of 0.5% in their Standard Variable Rates.
However, that is just about it as no major building societies have announced any plans to make any reductions in the rates that they charge their mortgage customers.
After taking over the Bradford and Bingley, one of the mortgage giants in the market in a rescue bid, the Abbey has announced a significant increase in its rates for the tracker mortgage deals by 0.5 per cent which will translate to customers paying exactly the same as when the Bank Base Rate was 5 percent.
The mortgage market has changed drastically with mortgage lenders taking full control. Mortgage borrowers are therefore left with no choice but to contend with the conditions that the lenders have set for them regardless of how tough they may be. The mortgage lenders are now calling the shots raising lending rates whichever way they feel best suits them in the current state of the market crisis. The recent move by Abbey to raise its tracker lending charges has prompted other lending institutions to do the same to create some sort of balance for the market by not standing out as being the ones offering the best deals; this is an action that would defiantly result in a surge in mortgage applications for home loans.
If the rate cut of the Bank Base Rate by the Bank of England is passed on to mortgage borrowers a good number of them will be direct beneficiaries of this great gesture towards trying to salvage the market situation. According to the Council of Mortgage Lenders (CML), about 4.2 million mortgage customers who are on tracker mortgage deals will benefit and an additional 800,000 others who are on standard variable mortgage deals.
British Prime Minister Gordon Brown has been on the front line in the economy rescue plan together with other European Union leaders. He has taken an active role in ensuring that property owners and households get the much needed support to get through these tough times and hence together with leaders of the big four EU nations agreed to the release of ₤12 billion towards the rescue. At the same time Gordon Brown is emphatic that no more banks should be allowed to go down as a result of a lack of liquidity.
The British Prime Minister is as a result expressed disappointed at the failure of some banks to pass on the rate reductions to the mortgage customers saying that the reduction was meant to benefit the mortgage borrowers as much as the lenders.
The reluctance of the mortgage lenders could stem from the fact that the LIBOR rate with which banks use to set their own mortgage rates remains high leading the banks to not lend to each other.
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