After a year of the Bank of England’s Base Rate at a record low of 0.5 per cent, banks are still cashing in on low base rate and not passing it on to customers who are paying high rates of interest on mortgages, personal loans and credit cards and recive very low rates on savings, according to analysis from moneysupermarket.com.
According to Hannah-Mercedes Skenfield, mortgage expert at moneysupermarket.com, the biggest winners from the fall in interest rates have been those consumers who have been sat on standard variable rates (SVRs). Traditionally lenders' SVRs have usually been higher than the deal that was ending, so consumers would have to remortgage as a result.
“Now we have a situation where many consumers are sitting on extremely low rates and have no incentive to move,” says Skenfield. “We’ve started to see SVRs starting to increase again, and rates for remortgaging starting to fall so, for some consumers, now is the time to consider looking for an alternative deal.
"The losers have been those consumers who have little equity in their property or those who have been looking to get a foot on the housing ladder, particularly first time buyers.
"Lenders have benefited from a low LIBOR and, after a period of inactivity, they are starting to loosen their purse strings and pass on some of these benefits to consumers in terms of lower rates. Borrowers need to be wary though as some lenders have introduced products with low ‘headline' grabbing rates only to charge high fees that make the mortgage less competitive compared to products with higher rates.
There are some good deals in the market at the moment so borrowers should consider fixing before rates start to rise again."
When it comes to savings, moneysupermarket.com, said there was no doubt savers have been the biggest losers during the past twelve months, with rates dropping dramatically. This coupled with recent rises in inflations has meant that it is almost impossible to gain a real rate of return on your savings pot.
"We have seen the average of the top easy access rates fall by 0.16 per cent in the past twelve months and the average best ISA rates fall by 0.56 per cent,” said Kevin Mountford, head of banking at moneysupermarket.com
“There are still some good deals to be had though, especially if you're prepared to lock your money away and fix the rate for a set amount of time. The average of the top 10 fixed rate bonds is 5.04 per cent, 4.54 per cent above base rate, up 1.05% on this time last year.
"Savers really do need to be on their toes in the current market as lenders chop and change their rates. If you want the best rate then you really do need to shop around."
As well as mortgages and savings, rates on personal loans have rocketed, according to the price comparison website
Just a few years ago, a personal loan was the perfect solution for anyone looking to borrow to buy a car or consolidate existing debts. Unfortunately, says moneysupermarket.com, the personal loan market has changed beyond all recognition with rates shooting up and borrowing for relatively small amounts becoming uneconomical.
“Although we have seen rates rise across the board, it has been borrowers who are looking for less than £5,000 who have been hit the hardest,” said Tim Moss, head of loans at moneysupermarket.com.
“The average rate for a £3,000 loan has almost doubled since 2007 when the average loan rate was 7.58 per cent despite base rate being at 5.25 per cent.
"Many lenders have closed their books completely to consumers looking for a loan while others will only accept customers who have existing banking relationships. The last twelve months has not been kind to borrowers looking for a loan and there is little sign of this changing in the near future."
