Lenders raise mortgage rates again despite base rate cut

The Bank’s Monetary Policy Committee (MPC) may have cut base rates to 5 percent on Thursday, but consumers are unlikely to benefit from this latest adjustment. The Times reported today that lenders have raised mortgage charges on the heels of the MPC’s decision to cut base rates – despite the fact that the Bank’s reduction is intended to ease pressure on struggling mortgagees.

According to The Times, four of the UK largest lenders – Nationwide, Britannia Building Society, Alliance and Leicester and Royal Bank of Scotland – increased rates on a variety of their home loans soon after the rate cut was announced. Analysts believe that other lenders are likely to follow suit, placing even more pressure on homeowners coming to the end of fixed-rate mortgages this year.

Head of the Council of Mortgage Lenders, Michael Coogan, explained to The Independent that lenders had no choice but to increase their charges at this juncture. “In these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders.”

Meanwhile, the director of Savills Private Finance, Melanie Bien, explained to The Times that a reduction in base rates is not necessarily proportional to mortgage rate cuts. “Even though the base rate is coming down, it does not follow that rates on mortgage deals will do the same,” she told the newspaper. “In fact, lenders are moving in the other direction, with several raising their fixed rates in the past couple of days. Unfortunately, we expect this to continue.”

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