Average mortgage rates in limbo after divorce from Libor

Despite the Base Rate continuing to hold at 0.5 per cent, providers are increasing average mortgage rates, and the margin above the Libor rate is rising, proving that the Bank of England is increasingly toothless when it comes to regulating the cost of mortgages, with lenders increasing profit margins at the expense of their customers.

Louise Cuming, head of mortgages at moneysupermarket.com, said:" In the last few weeks we have seen the margin between average mortgage rates and the Libor rate gradually creep up, despite the static Bank of England Base Rate. Lenders are benefitting from the fact that demand for mortgages outstrips the supply of mortgage deals and, as with any market, when supply is limited it causes prices to rise. Despite the Government's best intentions to ease the mortgage market, borrowers are still suffering as providers use every sneaky trick in the book to claw back profit."