- Lenders increasing margins despite static base rate
Since February 2009, for example, the Base Rate has fallen by one percentage point but the average Standard Variable Rate (SVR) has fallen by just 0.36 per cent, and the margin between the base rate and the average SVR has increased 0.64 per cent. In February this year SVRs were on average 3.42 percentage points above the Base Rate, but today it stands at 4.06 per cent above the Base Rate.
Interestingly, over the same period providers have passed on most of the Base Rate cuts to savers: the average best buy easy access savings account rate has fallen by 0.95 per cent (see table below). Providers have effectively widened margins by passing on almost all of the cuts to savers but less of the cuts to borrowers. In fact borrowers on "average SVR" are now paying nearly a full two per cent more than the average best buy savings account, compared to 1.4% earlier this year.
|
Base Rate |
Average SVR |
Difference between average SVR and Base Rate |
Average best buy easy access savings AER |
Difference between average SVR and average best buy easy access savings AER |
|
1.50% |
4.92% |
3.42% |
3.55% |
1.37% |
|
1.00% |
4.73% |
3.73% |
3.12% |
1.61% |
|
0.50% |
4.56% |
4.06% |
2.60% |
1.96% |
|
Sourced by www.moneysupermarket.com 29.05.2009 |
|
What's more the reduction in "average SVRs" masks a large disparity between lenders. There is now a three percentage point difference between the lowest and highest rate SVR products, which translates to £254.22 per month on a £150,000 mortgage. For example Nationwide Building Society's SVR now stands at 2.50%, whilst Chelsea's is 5.79%.
Louise Cuming, head of mortgages at moneysupermarket.com, said: "There is an increasing gulf between the lowest rate SVRs on the market and the highest as providers try to claw back profits.
"Consumers must be careful, the days of being able to safely assume you will automatically remortgage to another product as soon as your current deal ends are past, and many people might find themselves stuck on the SVR for a long time due to changing circumstances, and tightened eligibility criteria for the better deals. Therefore, people must pick their mortgage carefully and take the default SVR at the end of the deal into consideration.
"Buts what's good for the goose isn't good for the gander, and providers have decreased the AER on easy access savings accounts by greater than the decrease in interest rates as another way to increase profit margins."
The table below shows the changes made to SVRs by the 20 largest residential mortgage providers:
|
|
Rate Reduction |
|
Lender |
SVR |
Oct
2008 |
Nov 2008 |
Dec
2008 |
Jan
2009 |
Feb
2009 |
Mar
2009 |
Total reduction since Oct 2008 |
|
Bank of England
base rate |
0.5% |
-0.50% |
-1.50% |
-1.0% |
-0.50% |
-0.5% |
-0.50% |
-4.5% |
|
Abbey |
4.24% |
-0.15% |
-1.50% |
-0.50% |
-0.25% |
no change |
-0.45% |
-2.85% |
|
Alliance & Leicester |
4.99% |
-0.25% |
-1.10% |
-0.50% |
-0.25% |
-0.10% |
No change |
-2.20% |
|
Barclays/Woolwich |
4.99% |
-0.50% |
no
change |
-1.15% |
no change |
-0.50% |
No change |
-2.15% |
|
Bradford & Bingley |
4.59% |
no change |
-1.50% |
-0.75% |
no change |
-0.25% |
no change |
-2.50% |
|
Bristol & West |
3.49% |
-0.50% |
-1.10% |
-1.00% |
-0.50% |
-0.50% |
no change |
-3.60% |
|
Britannia
Building Society |
4.49% |
-0.50% |
-1.00% |
-0.31% |
-0.25% |
-0.25% |
no change |
-2.31% |
|
Chelsea
Building Society |
5.79% |
-0.30% |
-1.15% |
no
change |
no change |
no change |
no change |
-1.45% |
|
Coventry Building Society |
4.74% |
-0.25% |
-1.50% |
-0.35% |
-0.25% |
no
change |
no change |
-2.35% |
|
Clydesdale & Yorkshire Bank |
4.59% |
-0.50% |
-1.50% |
-0.15% |
-0.25% |
-0.15% |
no change |
-2.55% |
|
Halifax |
3.50% |
-0.50% |
-1.50% |
-0.25% |
-0.25% |
-0.50% |
-0.50% |
-3.50% |
|
HSBC |
3.94% |
no change |
-0.81% |
-1.00% |
-0.50% |
no change |
no change |
-2.31% |
|
Leeds
Building Society |
5.49% |
no change |
-1.15% |
no
change |
-0.45% |
no change |
no change |
-1.60% |
|
Lloyds TSB/C&G |
2.50% |
-0.50% |
-1.50% |
-1.00% |
-0.50% |
-0.50% |
-0.50% |
-4.50% |
|
Nationwide Building Society |
2.50%* |
-0.30% |
-1.50% |
-0.69% |
-0.50% |
-0.50% |
-0.50% |
-3.99% |
|
Northern Rock |
4.79% |
-0.15% |
-1.50% |
-0.50% |
-0.25% |
-0.30% |
no change |
-2.70% |
|
Royal Bank
of Scotland |
4.0% |
-0.50% |
-1.50% |
-0.75% |
-0.25% |
-0.19% |
no
change |
-3.19% |
|
Skipton
Building Society |
3.50% |
no change |
-0.50% |
-0.95% |
-0.50% |
-0.50% |
-0.50% |
-2.95% |
|
Standard Life Bank |
5.34% |
-0.50% |
no change |
-0.80% |
-0.25% |
-0.20% |
no change |
-1.75% |
|
West Bromwich Building Society |
5.84% |
no change |
-1.25% |
no
change |
no change |
no change |
no change |
-1.25% |
|
Yorkshire Building Society |
4.99% |
-0.30% |
-1.00% |
-0.61% |
no change |
no change |
no change |
-1.91% |
*For existing customers before May 2009.
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