Three weeks on from the Base Rate increase

Lisa Taylor, analyst at moneyfacts.co.uk comments: “Three weeks on from the MPCs decision to increase bank base rate, we are still waiting for 39% of mortgage lenders and 20% of savings providers to announce any increase to their rates. Compared with three weeks on from the August rise, this is 20% less mortgage changes to date and 27% more savings increases.

Mortgages

“To date 61% of mortgage lenders have increased their SVR by between 0.20% and 0.34%, with 68% already charging the higher rate to their new customers. As expected within in this competitive market, the vast majority of lenders have passed on the 0.25% increase, with only six so far increasing by an amount less than the quarter point, and six deciding to take this opportunity to raise their SVR by more than the base rate increase.

“The average of these new SVR rates currently stands at 6.58%, over 1.50% above bank base rate. So for any borrower paying a lender’s SVR this can be a very costly time, but we need to remember that these increases will also have an impact on any mortgage which rate is linked to an SVR, these normally being discounted deals.

“So before being deterred or attracted to a lender simply by the fact it has increased by more or less than a base rate rise, it is important to look at their full product offering. Lenders may not have any products linked to their standard variable rate, in which case the impact should only be felt by a relatively small number of consumers.

“We are still waiting announcements from some of the larger lenders, namely HSBC and NatWest. The Woolwich announced this week a rise of 0.30% to 7.14%, but again, it does currently not offer any SVR linked products.

“We anticipate many lenders are waiting for the 1 December to announce, so next week should be fraught with activity.

Savings

“On the savings front, 80% of providers have announced increases to their savings rates, with 88% of these applying the increases across their whole product range. Most savers can expect a rise of 0.25%, but don’t assume this will be the case, with 30% of providers opting for a rise of less than 0.25% on either all or some accounts / tiers.

“The unexpected announcement from ING this week, has caused quite a stir. ING has advised customers that it will not on this occasion be increasing its rate following the base rate increase, suggesting in their correspondence to customers that ‘people prefer to earn a consistent rate’. While we could agree a consistent and competitive approach is welcomed by many consumers, I wonder how the many loyal ING customers feel about missing out on an additional quarter per cent on their savings.

“With Birmingham Midshires basing its Direct Saver account on a guarantee to beat ING by 0.25% it will be interesting to watch how this battle unfolds in the future. With ING remaining static and Birmingham Midshires passing on the full quarter increase this time round, Birmingham Midshires are now offering a full half per cent more than its rival.”