Banks failed to pass on the record cuts in interest rates last month to mortgage borrowers, but slashed interest due to savers, according to figures published today by the Bank of England (hand's up anyone desperately surprised ?, Really Alistair ?).
On average, interest rates on two-year fixed rate mortgages for homes purchased with a deposit of 25 per cent (the most common form of borrowing) fell to 4.79 per cent from 5.1 per cent in November, the Bank of England’s survey of quoted rates showed.
Still just a touch higher than the Bank base rate of 1.5 per cent then. To be fair the rate cut was passed on more fully to those with tracker mortgages, which on average fell to 4.95 per cent from 5.78 per cent.
Quoted rates for new fixed-rate mortgages with a 25 per cent deposit and a longer term have also not fallen much. Three-year fixed mortgages were cut from 5.46 to 5.15 per cent and for five year mortgages from 5.47 to 5.31 per cent.
Savers however were hit hard by cuts in the interest paid on their deposits.
Interest paid on instant access accounts fell from an average of 1.68 per cent to 0.81 per cent, while that paid on fixed-rate bond deposits – which often require savers to keep their money in saving for at least a year – fell by marginally more than 1 percentage point to 3.01 per cent.
Interest rates for ISAs were cut by 1.7 percentage points, and on savings with a specified time length of deposit by 1.5 percentage points.
The refusal of banks to lower rates, despite the £40bn recapitalisation of the banks using public money, must be a touch frustrating for the Prime Minister and Chancellor who can't make the banks lend despite, for example owning 43.4% of Lloyds HBOS group. (Note - if you are going to do it chaps, 51% is a good figure to aim for).
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