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Mortgage lenders slow to pass rate cuts on

Paloma Kubiak
Written By:
Paloma Kubiak

The Bank of England (BoE) has noted that mortgage lenders were not as quick to pass on the full extent of the record rate cuts it made at the start of the coronavirus crisis.

In March, the central bank made two emergency cuts to its Bank Base Rate, taking it from 0.75% to the all time low of 0.1%.

As a result, vast numbers of tracker rate mortgages were removed from the market and the Bank subsequently warned lenders that it would closely monitor how the rates were passed on to borrowers.

Now, three months after the base rate cut, the bank’s Monetary Policy Committee (MPC) suggested lenders were slow to adjust their offerings to reflect the reduction.

“The committee continued to monitor the pass-through of its recent 65 basis point reduction in Bank Rate,” the MPC said.

“Pass-through of the reductions in Bank Rate to new mortgage rates had been slower than expected to date. That might reflect lags in transmission or other more enduring factors.

“Effective rates on the stock of standard variable rate and tracker mortgages had fallen by 54 basis points and 57 basis points respectively between February and April,” it added.