Two months on from the base rate cut on 4 August, many might assume the full effect of the cut should now be visible. However, research from Moneyfacts.co.uk shows that the effect is mixed at best.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said:

“Many borrowers on their Standard Variable Rate (SVR) hoping to benefit from the Bank of England reduction could be sorely disappointed as two months on, a quarter of lenders have still yet to cut their rates to reflect the new circumstances. In fact, the average SVR has fallen by just 0.17%, meaning on average borrowers are £9.10* a month or £109.20* a year out of pocket.

“Lenders are facing pressure from the uncertain state of the economy, making them err on the side of caution as they react to the change in base rate.

“The picture is much brighter when looking at the average lifetime tracker rate, which has fallen by more than the 0.25% cut. This is likely to boost borrowers looking to take advantage of the low-rate environment we are expecting to experience for the foreseeable future.

“However, fixed rate mortgages are at record lows and anyone coming off a deal or looking to remortgage would still be wise to look at a fixed deal. For example, borrowers would be £241.26* a month better off based on the average two-year fixed rate at 2.38% compared to the average SVR of 4.63%.

“With many mortgage deals at record lows, it is now a question of if they are able to sustain this new level, and for how long.”

*Based on a £200,000 mortgage over a 25-year term on a capital and interest repayment basis.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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