Consumers see few benefits from low base rate

Consumers have seen very little benefit from the Bank of England holding its base rate at a record low of 0.5% for six months, a consumer advice site pointed out this week.

Interest rates on savings accounts have dropped, while rates on mortgages, credit cards, and personal loans have continued to rise, said Moneyfacts.co.uk.

Research by the site found interest rates on easy access savers have dropped to an average of 0.77%, compared to 0.98% six months ago.

Cash ISA rates have followed a similar path, dropping from a 1.76% average to 1.46% in six months.

Meanwhile, the average rate on a two year fixed-rate mortgage has risen from 4.84% to 5.15%, on personal loans has risen from 11.9% to 12.1%, and on credit cards has increased from 17.7% to 18.1%.

“Base rate has been at an all time low for six months now, but it appears that only providers are feeling any real benefit,” said Moneyfacts financial expert Michelle Slade.

“Borrowers looking for a new mortgage deal have been hardest hit, as lenders continue to look to repair their balance sheets through increased margins.”

However, she added that HSBC’s recent launch of a 1.99% fixed rate mortgage shows that things could be improving.

“The launch of the sub-2% HSBC deal will hopefully spur other lenders on to reduce rates and bring much needed competition back to the market,” she said.

“Consumers will be hoping that as more time passes competition will become an increasing factor and that they will be offered more attractive deals across all finance areas.”