Down goes the base rate - up go the mortgages

[Legal Beagles]

The pressure has been on banks to help home-owners. But the promises all seem to be proving empty

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[argentarius]

Re: Down goes the base rate - up go the mortgages

How long will it take for the message to hit home, that Bank of England base rate is completely irrelevant to mortgage rates?

As the article states, lenders' borrowing costs are driven by LIBOR - for wholesale funds - or by savings rates - for retail funds.

Savings rates are not falling in the slightest. LIBOR didn't fall at all when BoE base rate was cut. Basically, none of the lenders' costs have fallen due to the base rate reduction and hence to expect a mortgage SVR reduction - or a reduction in the rates on new tracker mortgages - is completely misguided.

This comment:

Louise Cuming, head of mortgages at the website moneysupermarket.com, says: "Mutual organisations are supposed to put their members first, but they clearly haven't in the past week. People on SVRs are traditionally those who have struggled to get a mortgage, so they are in even greater need of some relief. Kent Reliance at 7.59% and Darlington at 7.37% should be ashamed of themselves."

is tosh. Mutuals have been putting their members first, by paying attractive savings account rates. Most building societies have 10 times as many savers as they do borrowers. Cutting savings rates to track BoE base rate will make 10 times as many mutual members suffer as it benefits mortgage borrowers. And, worse than that, it will mean that the building societies lose vast savings balances and run out of money, preventing new lending.