Money News
As expected the Bank of England has cut base rate by 0.25% to 5%. But for some homeowners and would be purchasers the move will have little if any impact in the short term. That's because of the growing disconnect between base rate and the rate (Libor) at which banks lend to one another.
Libor has remained stubbornly high - the consequence being that banks and building societies have been reluctant to pass on any base rate cuts across their entire mortgage ranges, given wholesale mortgage funding has become more expensive.
Homeowners with tracker mortgages that follow base rate will benefit, however. But for those borrowers on SVR (Standard Variable Rate) loans, as well as those remortgaging after coming to the end of their fixed rate loans, the picture is far more uncertain. That said, the Halifax, Nationwide and Abbey - along with Barclays, Cheltenham & Gloucester, First Direct and Bank of Scotland - have indicated that they'll pass on the latest cut. But others have yet to formally respond.
Prior to the BoE's decision Nationwide Building Society confirmed it's hiking rates on some of its fixed rate loans by between 0.12% and 0.32%, effective Friday.
However, the Society will be launching two new mortgages, a 3-year fixed rate (available from 5.75%, with a £599 fee) and a 3-year tracker (available from 5.99% with a £599 fee) - both loans available to borrowers dealing directly with Nationwide. The former is at a rate lower than previously offered.
The Society says the initiative is aimed at controlling business volumes as rival lenders withdraw products from their own ranges and would-be borrowers take their custom elsewhere. That'll be of little comfort to cash-trapped first time buyers who have to stump up ever larger deposits due to the ongoing credit crunch.
Post the rate cut the Society announced it will decrease its Base Mortgage Rate (BMR) from 6.74% to 6.49% - effective May 1st. The lender says savings rates are under review and any changes to these rates will be announced in due course.
Existing tracker mortgages will decrease by 0.25%, moving in line with Base Rate. This change will also be effective from May 1st.
Meanwhile, first direct has cut its standard variable rate by 0.25% to 6.00% (6.2% APR).
first direct recently announced that as a temporary measure it was withdrawing its mortgages from sale to non first direct customers. The move was to enable the bank to focus its efforts entirely on processing the unprecedented number of applications for its home loans in recent weeks.
The bank continues to offer its mortgage products, but only to existing first direct customers, regardless of whether they have a mortgage with the bank.
It is expected to reopen its doors to new customers again in the coming weeks.
10 April 2008 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.