uSwitch.com: Bank of England base rate cut

In response to today's decision by the Bank of England to decrease the base rate by 0.5% to 1.5%, Louise Bond, personal finance manager at uSwitch.com comments: "With 2009 set to be one of the toughest years on record for consumers, the Bank of England's move today indicates that it will continue to take an aggressive approach by slashing rates to a record low of 1.5%. However, the question remains, who will really benefit from yet another rate cut?

"The average instant access savings rate is now a miserly 1.48% on average, which indicates that the only real beneficiaries from the declining base rate are the 3 million existing tracker mortgage customers. Sadly, there are exceptions to this as Nationwide's 200,000 tracker mortgage customers will fall victim to their small print as it states that no further cuts will be passed on. This also applies to customers with smaller lenders such as Skipton and Yorkshire Building Society who have invoked collar clauses.

"This week, HSBC also made the pre-emptive move of actually increasing its tracker rate to 3.95% from 3.64% to help protect its profit margin against today's cut, and many providers have already withdrawn their tracker mortgage range, no doubt with the plan to relaunch them post the cut. It is likely that we will see a further glut of mortgage providers' declining to pass on today's cut or following HSBC's lead and increasing rates on tracker products.

"The mortgage market has never been so confusing for both new and existing customers. First time buyers looking to secure a new mortgage could be facing a mere pipe dream. With more and more existing borrowers set to fall into negative equity in 2009, those looking to remortgage will find few, if any, lenders willing to take on this level of risk. People coming to the end of their existing deal should seriously consider defaulting to their provider's SVR as this could be more cost effective than paying hefty fees for what could be a more costly option."