Loan Rates Yet to Benefit from Base Rate Cuts

Wed, 14 May 2008

Despite the Bank of England’s decision to cut the base rate in April, homeowners continue to face rising monthly mortgage payments. Despite the quarter point cut which left the base rate at 5 per cent, the typical interest rate on a two year, 95 per cent loan to value mortgage, increased by 0.34 percentage points to 6.94 per cent between March and April. That figure, nearly 2 per cent higher than the base rate, is the highest rate charged by lenders on such loans since February 2000.

Meanwhile, a 75 per cent loan to value mortgage over the same period experienced its greatest increase since November, with the average rate now at 6.08 per cent. Whilst the typical standard variable rate remained at 7.24 per cent between March and April, it remains to be nearly two and a quarter per cent above the base rate.

The Bank of England’s recent £50 billion scheme should ease bank’s anxiety and see greater lending between banks, though it remains to be seen if these benefits will be passed on to homeowners .
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