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No change for the Base Rate but lenders fight back

Featured Articles
Published: 15 Jan 2010 in Money and Mortgages

By Sharon Flaherty

The New Year has now kicked off, bringing with it the first Bank of England decision on interest rates.

After holding the Base Rate –commonly known as interest rates – at 0.5 per cent for most of last year, the Monetary Policy Committee which meets monthly to decide whether to hold, raise or decrease interest rates, has opted to leave rates unchanged for the eleventh consecutive month (7 January 2009).

Lenders increase standard variable rates

However, despite the fact the Bank of England Base Rate has not increased since July 2007, and remained at 0.5 per cent for the most part of last year, mortgage lenders are now making moves in the opposite direction and are beginning to raise their own standard variable rates anyway. (See: Standard Variable Rate Mortgages)

In the last few weeks, a number of lenders, mostly building societies, have begun to increase the standard variable rates they charge, including the Mansfield Building Society, Scottish Building Society, Kent Reliance and Accord (part of Yorkshire Building Society), amongst others.

Mortgage expert, David Hollingworth at broker, London and Country (L&C), explained: “There have been further moves this week by building societies to push up their standard variable rates, and it affects first-time-buyers and existing borrowers.

“Building societies are guilty of doing this at the moment more than banks, as they have to pay higher rates of interest to savers to attract their funds as the savings market becomes more competitive.”

Will lenders continue to hike mortgage rates?

According to (L&C), this trend looks set to continue as lenders know that borrowers coming off a special fixed rate or discounted deal may find it difficult to remortgage with another lender, given that there is still not a lot of competition in the mortgage market.

So what is the key message? L&C says that those looking to remortgage in particular, should be shopping around now more than ever and should take the time to compare deals.

“There’s a huge variance in some deals, so those looking to remortgage should check what their rate reverts to at their lender, then shop around.

“For first-time-buyers, it looks like the base rate will stay low for a long period of time and it can be appealing for first-time-buyers to fix their rate, and that’s still a good option,” Hollingworth added.

So, if you are looking to get on the housing ladder or need to remortgage, check out this table of mortgage best-buys.* And if getting on the property ladder is proving a nightmare for you, let us know your thoughts on our latest property blog.

Lender	Scheme	Initial Rate	Ongoing Rate	Overall cost for comparison (APR)	Fee	Max LTV	ERC	Notes
Remortgages
L&C Exclusive	Base +1.94% for 2 years	2.44%	4.99%	4.7%	£1,995	70%	For 2 years	Flexible. Free valuation & legal work
HSBC	Base +2.09% for life	2.59%	2.59%	2.7%	£999	60%	None	Free legal work
Cumberland BS	Fixed until 01/03/12	3.49%	4.49%	4.5%	£995	60%	Until 01/03/12	Free legal work
Newcastle BS	Fixed until 31/03/15	4.89%	5.99%	5.9%	£588	80%	Until 31/03/15
First Time Buyers
Principality BS	1.00% discount until 31/01/12	3.99%	4.99%	5.1%	£999	85%	Until 31/01/12	Flexible
RBS	Base +4.29% until 31/03/12	4.79%	4.00%	4.4%	£999	90%	Until 31/03/12
Yorkshire BS	Fixed until 28/02/13	5.84%	4.99%	5.4%	£0	85%	Until 28/02/13	Free valuation & conveyancing. 1% cashback
Yorkshire Bank	Fixed until 31/03/13	6.99%	4.59%	5.3%	£599	95%	Until 31/03/13