Bank must keep up pressure on lenders

Another 1% cut in the base rate is needed to keep up the pressure on lenders to pass on reductions to hard-pressed borrowers, online mortgage company www.mform.co.uk believes.

The firm says taking the base rate to 1% is vital following yet more evidence that lenders are dragging their feet on cutting rates for existing borrowers and increasing charges for new customers.

HSBC, the UK’s most competitive mortgage lender, yesterday raised rates on its tracker mortgage to 3.95% from 3.64% for new customers and the majority of lenders have failed to pass on December’s 1% cut in full.

The online mortgage company is urging the Bank to cut by 1% and points to the current low rates available in money markets as evidence lenders can afford to cut rates.

Money market rates show the cost of 2-year and 3-year money is now 2.61% and 2.9% respectively compared with 6.1% and 6.07% a year ago.

Even 5-year rates have fallen to 3.09% compared with 5.94% a year ago.

More than 200,000 borrowers will see fixed-rate deals end over the next 3 months and will be in the market for new mortgages providing a boost for lenders if they are willing to lend.

Eamonn Rice, chief Executive of mform.co.uk, says: “A 1% cut is vital to ensure that lenders no longer have any excuses when it comes to mortgage rates.

“Banks have been bailed out by taxpayers and the Bank of England has slashed rates and given the banks everything they’ve wanted.

"It is time the lenders started doing what they’re meant to do and that is to lend.

“There are signs that borrowers want to borrow and with house prices falling and affordability rising we might even see the return of first-time buyers.

"There are hundreds of thousands of people who need to remortgage.

"The mortgage market is ready to start up again.

“Some consumers are confident despite the current gloom but they need confident banks and building societies that are willing to lend.

"A rate cut of 1% is as much about improving banks’ confidence as that of borrowers."

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Bank must keep up pressure on lenders