It's 'as you were' for homeowners after the Bank of England cut

Lenders fight shy of passing on 0.5 per cent reduction in base rate to mortgage customers
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Mortgage customers have felt little benefit so far from Wednesday's cut in the Bank of England base rate.

The 0.5 per cent reduction to 4.5 per cent would normally have prompted a steady stream of mortgage rate cuts. But Richard Morea at broker London & Country says that hasn't been the case this time. "Normally you would see a steady flow of lenders reducing their standard variable rates, but after the Halifax, Barclays and Lloyds lowered their rates, we have seen precious little movement. It is very unusual."

Indeed, some tracker mortgages – which follow the base rate but at a slight premium – have actually become less attractive. "What's happened is that some lenders, most notably Abbey, have raised the premium," adds Mr Morea. "So, in effect, borrowers will see no reduction in what they pay."

Neither have fixed mortgages, which currently account for more than half of new home loans, shown much sign of moving lower, according to brokers. But this reflects what is going on in the international money markets, with the rate at which banks lend to each other, called Libor, not falling in line with the base rate. Experts say Libor will have to decrease before mortgage deals can become less expensive.