uSwitch comments

on today's decision by the Bank of England to decrease the base rate by 0.25% to 5%:

Ann Robinson, Director of Consumer Policy at uSwitch.com, comments on today's decision by the Bank of England to decrease the base rate by 0.25% to 5%: "The MPC has offered a small ray of hope to the turbulent mortgage market.

The decision to cut the base rate by 0.25% to 5% will come as welcome news for the nation's struggling borrowers - if this cut is passed on in full then homeowners with a £150,000 repayment mortgage will find themselves £22 a month or £264 a year better off.

"However, this is a drop in the ocean for the average consumer's monthly budget.

In the last year alone people have been hit with an inflation-busting 9% or £1,783 increase to the cost of essential bills compared with a miserly 3.4% or £533 increase to the average wage.

Overall, this leaves the nation's households £21 billion in the red.

Against this backdrop, £22 a month seems like a modest saving, but it could be a lifeline for those families struggling to stay afloat.

"While the base rate reduction provides light relief for some, first time buyers and those set to come off a fixed rate mortgage, could be forgiven for not performing cartwheels at the news.

Many lenders are yet to pass on the recent base rate reductions - instead they are busy increasing rates, demanding larger deposits, tightening lending criteria and, in some cases, withdrawing deals from the market altogether.

"By refusing to pass on rate reductions and taking extreme measures to reduce business volumes, lenders are fuelling the current lack of confidence in the property market.

Sadly, there is no sign of the situation improving with the Libor rate (London Interbank Offered Rate) reaching around 6% this week, 1% higher than the new base rate.

This means that mortgage providers are paying a premium to get hold of cash to lend, so they really have their hands tied until the wider economic climate warms up." Robinson concludes: "While all this is going on it's very easy for consumers to feel helpless.

But, in fact, we can all help ourselves by taking a good look at our household budgets to see where we can cut costs.

There are potential savings of around £3,000 to be made on household bills and financial services - all it takes is some careful shopping around.".

Back to top