Two weeks on from the Base Rate increase

Two weeks on from the decision to raise bank base rate by a quarter point, and we are still waiting for 57% of savings providers and mortgage lenders to announce any changes to their rates. Lisa Taylor, analyst at moneyfacts.co.uk comments:

Mortgages

“In total, 57 providers have increased their standard variable rate, with only two opting for an increase greater than the quarter percent rise, and four choosing a smaller increase of 0.20% or 0.24%. Of those providers who have increased their rates, 44 lenders are already applying their higher rates to new borrowers.

“This week the only lender to announce a rise greater than the quarter point was Abbey, increasing its SVR by 0.34% to 7.09%. But while this may appear to be unfair on the consumer, none of Abbey’s products are currently linked to SVR. So only a very small minority of their customers will be affected, those that have remained on a SVR after their deal had expired. Let’s hope this extra increase will be enough incentive to encourage these consumers to review their mortgage payments and to shop around for a better deal.

“Much like the last rise we are still waiting for some of the bigger players, Woolwich, HSBC and NatWest to make an announcement. With a third of lenders yet to announce being building societies, who will undoubtedly have to wait for board approval to agree any increase, it will certainly be a good few weeks before we have the full picture.

Savings

“On the savings front, a total of 54 institutions have increased their rates, but of these, only 42 have applied the rise to their whole savings range. This does not mean that in time this will apply to other savings products. In most cases it is that they have products directly linked to base rate, for which they are obliged to change within an agreed timeframe.

“Pleasingly those in the savings market have also been fairly quick to pass their increased rates to new customers, with 63% of the changes currently in force, and the remaining 20 accounts due to change between now and 6 December.

“Only two providers to date have opted for a 0.20% rise, and both tell a very different story. Homesdale BS has not passed on the full quarter rise to its new savers on either of the last two increases. But this time it has increased its SVR by 0.25%, still leaving it well below the industry average.

“On the other hand, Cahoot choosing to only raise their rates by 0.20%, highlights two important factors the consumer should consider. First the Cahoot account does have a rate guarantee, but the level at which this was set still allowed for this smaller increase. So don’t assume that if your savings providers offers a rate guarantee, you will automatically receive any rate increases. Take care to read the wording carefully. Secondly, whilst we may criticise providers for not passing on the whole increase, it is more important to look at the pay rates, as shown in the example above, Cahoot still remains a very competitive savings proposition in the current market.