Rates cuts boost lenders profits
Updated on 27 October 2008
A number of lenders are using the recent interest rate cut to boost their margins, slashing savings rates but failing to pass on the full reduction to borrowers.
Since the Bank of England announced it was cutting the official cost of borrowing by 0.5% to 4.5%, 38% of savings providers and 44% of mortgage lenders have announced rate cuts.
But while nearly all savings providers that have made announcements are cutting their rates by the full 0.5%, a number of them are not slashing their mortgage rates by this amount.
HSBC has said it will not be reducing its standard variable rate at all following the recent fall in the base rate, but its savings rates are coming down by 0.49%, according to financial information provider Moneyfacts.co.uk.
Northern Rock is also among those who have cut their savings rates by the full 0.5%, but their SVR by only 0.15%.
A number of building societies have also reduced their savings rates by more than their mortgage ones, while other major providers who have not passed on the full reduction to SVR customers have yet to announce what changes they plan to make to their savings range.
Michelle Slade, analyst at Moneyfacts.co.uk, said: "When base rate was cut, consumers thought they were finally going to start feeling some relief on their overstretched finances.
"Unfortunately the providers have used the cut as a way to shore up their balance sheets.
"Although it is well publicised that the banks and building societies need to do more to improve their current financial positions, consumers will feel bitterly disappointed that they are not feeling the benefits."
She said building societies had been the biggest offenders in not passing on the cut in full.
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