Mortgage Lenders Told Pass On Interest Rate Cuts

Mortgage lenders have been told to pass on interest rate cuts and the government is putting pressure on mortgage lenders to pass interest rate cuts onto borrowers immediately.  At a recent press conference, Prime Minister Gordon Brown reminded mortgage lenders of their duty to take changes to the base rate into account when setting interest rates and make interest rate cuts.  

The average mortgage lenders Standard Variable Rate (SVR) in the market is 7.4 per cent.  However, we suggest that out of 100 mortgage lenders with standard variable rates, 18 mortgage lenders had not passed on interest rate cuts and all and a further 16 mortgage lenders had not passed on the interest rate cut in full.  But a further 66 mortgage lenders had passed on the entire interest rate cut to borrowers.  

Our view

Given that it now more expensive for mortgage lenders to borrow money in the wholesale market, we suggest that many mortgage lenders will be reluctant to pass on any base rate interest rate cuts so that they will maintain their profitability.

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