BSA comments after Monetary Policy Committee increases Bank Base Rate

Commenting on today’s Bank Base Rate rise, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said:

“Today’s MPC decision means the Bank Base Rate is now at its highest level for over nine years, although interest rates still remain low relative to their historic averages.  The majority of mortgage borrowers will see no immediate impact on their household finances as two-thirds of existing mortgages are on fixed rates.  Transaction levels amongst home-movers are already subdued, partly because of Brexit related uncertainty.  How much rates will move in such a highly competitive market remains to be seen. Savers, many of whom have seen their income decimated over the last decade will welcome the rate rise, although lenders will need to balance the interests of savers and mortgage borrowers when making rate setting decisions.”

Information:

Mortgages:

• A 0.25% increase on a £100,000 repayment mortgage = c £13 more per month (BSA)
• £280 is the average increase in monthly payments borrowers say they can manage (FCA²)
• 66% of all outstanding mortgage balances are on fixed rates (whole market/ FCA MLAR)
• 91% of new lending is on fixed rates (whole market/FCA MLAR)
• Around 40% of new Building Society fixed rate mortgages are 2 year, another 50% are 5 year (source UKF¹)

Savings:

• Although only a modest absolute increase in the bank rate, this announcement is good news for savers.
• In 2017 building society savers earned £775 million in additional interest compared to what they would have earned on the average interest rates paid by large banks³
• Building societies work to deliver the best value possible for savers in a sustained low interest rate environment.  In July 2018 - 73% of building society accounts paid a rate of interest above the Bank Base Rate compared to 54% of competitors (Savings Champion July 2018).
   
• ¹UKF = UK Finance RMS figures and relate to building societies only
• ²FCA Financial Lives survey October 2017
• ³BSA analysis comparing the average interest paid on savings balances held with building societies, with the amount that would have been paid using the average effective interest rates on savings held with large Monetary Financial Institutions as collated and published by the Bank of England.

Press Contacts:

• Hilary McVitty - Tel  0207 520 5926
• Amy McCluskey -  Tel: 0207 520 5927
• Paul Broadhead - Tel: 0207 520 5917