UK Edition
Mortgage rates barely budge despite Bank of England hike
Mortgage costs have hardly moved in the month since the Bank of England raised its base rate, and interest costs are almost exactly where they were 12 months ago, according to data from Moneyfacts.
Mark Carney and his colleagues at the Bank hiked the rate for the first time in more than a decade in November from 0.25pc to 0.5pc.
But the average two-year fixed mortgage on the market has only gone up from 2.31pc in the days before the rate rise to 2.34pc now, indicating that banks have only passed on part of the increase.
Mortgage rates did climb in the months before the hike as lenders began to anticipate the increase, but even counting from the lowest ebb, rates have only risen by 0.18 percentage points, as opposed to the 0.25 base rate rise.
The standard variable rate (SVR), charged to those customers who are not on a fixed or floating deal, typically moves in line with the base rate.
But even this has risen by an average of only 0.14 percentage points to 4.74pc, Moneyfacts said.
“Just 56pc of providers have passed on a rise to their SVR, with seven of them choosing to increase their rates by less than the 0.25pc, which has caused the average SVR to rise more modestly,” said Charlotte Nelson of Moneyfacts.
“Borrowers may feel they are getting a reprieve from the full effects of the base rate rise, but when the highest SVR is currently priced at 6.08pc, it may be little consolation to know that some SVRs have not seen a rate rise.”
Meanwhile savers have seen even less of a rise.
The average instant access savings interest rate rose by just 0.07 percentage points, Moneyfacts said.
A range of big banks have increased their rates on offer by around 0.15 percentage points, but challenger banks still dominate the best buy tables.
This week’s interest rate decision on Thursday is expected to see the Bank of England hold rates and give an update on the state of the economy in the month since its hike.
Markets believe the next rate hike could come in May 2018 as officials act to stop record low unemployment and rising wages feeding through into excessive inflation.
Last month the Bank indicated that it expects to raise rates twice more by the end of 2020 to keep inflation below 3pc.