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Base rate 'could become obsolete' for secured loans

Base rate 'could become obsolete' for secured loans

Category: Loans

Updated: 31/10/2008
First Published: 30/10/2008

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Borrowers with secured loans that track the Bank of England's base rate are not fully benefiting from cuts, it has been stated.

Moneyfacts.co.uk has found that despite tracker rates being reduced since the last cut was announced, many mortgage customers are paying as much as they were a year ago.

According to analyst Michelle Slade, the average tracker mortgage had an interest rate of 6.23 per cent in October 2007, while the current average is 6.27 per cent.

But in the same time period the base rate has fallen by 1.25 per cent.

Ms Slade remarked: "Base rate used to be a major barometer when determining mortgage rates, but it could become an obsolete component of a mortgage if lenders do not pass cuts on."

Recently Al Elliot, advisor at the Homeowners Advice Centre, noted that banks are protecting profit margins by not passing on cuts in interest rates to secured loans holders.

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