Savers suffer as base rate cut brings some joy to borrowers

by Gill Montia

Story link: Savers suffer as base rate cut brings some joy to borrowers

In a round-up of mortgage interest rates one month after the base rate fell to 2%, Moneyfacts.co.uk has reported that only 19 lenders passed on December’s full 1% reduction to homeowners.

Meanwhile, 72% of lenders surveyed passed on cuts of between 0.15% and 0.99%.

The financial data provider also found that five mortgage lenders had maintained standard variable rates of 6% or above.

Banks and building societies have been arguing that they need to maintain attractive rates for savers, which will not be possible if they follow aggressive cuts in the base rate.

Nationwide recently announced that it would no longer pass on cuts to the majority of its tracker mortgage customers, invoking a clause that allows it not to follow the base rate once it falls below 2%.

However, Moneyfacts analyst, Michelle Slade, points out that the three lenders with the highest SVRs have all cut savings rates by more than the December base rate cut.

Overall 77% of providers have cut savings rates, with the majority passing on the full 1% reduction or more.

According to Moneyfacts, the average savings rate on a no notice account containing £5,000 now stands at just 1.48% and 38% of the accounts surveyed were paying 1% or less.

The Bank of England’s Monetary Policy Committee is expected to cut the base rate by at least 0.5% this week and Prime Minister Gordon Brown has promised help for those reliant on income from savings.

Options available include increasing the allowance on Individual Savings Accounts and reducing income tax rates on savings for over 65s.