Five year anniversary since Northern Rock - winners and losers

With September 14 marking the fifth anniversary since the run on Northern Rock, heralding the start of the credit crunch in the UK, MoneySupermarket (MONY) analysed how the financial landscape has changed since 2007.

The most significant change occurring during this period has been the fall in the Bank of England Base Rate which has dropped from 5.25 per cent since 2007, to the current record low of 0.5 per cent, impacting both savers and borrowers.

Savings

Savers who rely on the interest from their savings to provide a regular income will have been hit the hardest with the dramatic fall in the Bank of England Base Rate, as rates plummeted. This combined with the eroding effect of high inflation made it difficult to gain a positive real return on savings. However, despite much lower rates, it could have been worse as savers have actually benefited from unprecedented margins between the top paying savings accounts and Bank of England Base Rate.

The top savings accounts offer a rate six times that of Base Rate with the average margin between base rate and the top five easy access savings accounts currently at 2.48 per cent compared to just 0.83 per cent in 2007.

Mortgages

The mortgage market has been significantly impacted by the credit crunch although that is not surprising given mortgages are where the crisis originally stemmed from. The total number of mortgages has fallen from 22,457 in September 2007 to just 2,502 now as a result of lenders tightening their acceptance criteria and reducing the number of loans available to borrowers with small deposits. First time buyers have faced a struggling market with the demise of 100 per cent loan to value (LTV) mortgages, and the number of products available to first time buyers down from 13,644 to 1,314, coupled with the difficulty of saving up a large deposit.

Existing borrowers, however, have been reaping the rewards of a low Base Rate environment with many still on variable rate loans they took out prior to the onset of the credit crunch and reduction in Base Rate.  Some borrowers are paying rates only marginally higher then Base Rate.

We have also seen historically low fixed and variable rate mortgages available to those looking for a new mortgage. The leading deals are only available to those with a sizeable deposit however - in some cases as much as 40 per cent.

The average three-year fixed mortgage rates have fallen from 6.25 per cent in 2007 to 3.68 per cent while two-year fixed mortgages have dropped from 5.67 per cent to 3.01 per cent. Based on a £150,000 mortgage, this represents a saving in monthly payments of £224.01 and £224.32 respectively.

Borrowing credit

Unfortunately, there is a different story on other credit related products. Despite the decrease in Bank Base Rate, the average APR on credit cards has increased by an average of 2.03 per cent, with the average APR currently standing at 17.25 per cent. Someone borrowing £5,000 on a personal loan will now pay 0.94 percentage points more than they did in 2007. Overdraft rates have also increased from 17.81 per cent in 2007 to 19.53 per cent now, meaning the average cost of a £1,000 overdraft has increased from £178.10 in interest over 12 months, to £195.30.

Kevin Mountford, head of banking at MoneySupermarket said: "Looking back over the last five years paints an interesting picture, but it may not be as negative as we think. The most significant change has been the reduction in Bank of England Base Rate by 5.25 per cent since 2007, impacting both borrowers and savers who may sit at polar opposites on the scale of ‘credit crunch winners and losers'.

"Millions of borrowers have benefited from a low Base Rate environment taking full advantage of the fall in mortgage payments, with the savings being absorbed into everyday living costs. However, the danger is, when rates rise, many people will find they don't have the spare cash to fund the increases in their monthly payments. For those looking to get onto the property ladder cash is king, as the leading deals now require sizeable deposit and those looking to borrow 90 or 95 per cent of the property's value continue to pay a premium for a mortgage.

"Savers may consider themselves the biggest ‘losers' since the credit crunch as they have struggled from the significant fall in Bank of England Base Rate as well as the effects of inflation on their savings pots. However, savers can still fight back by ensuring they review their products regularly and switch if necessary - there are rates out there which are a big jump up from Base Rate. Consumers should also get into the habit of saving, as even a few pounds every week can help to build up a buffer. Unfortunately apathy still rules in the savings market and many consumers fail to take advantage of the decent rates on offer."