Mortgage cut 'delay' and best savings rates 'slaughter'

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Millions of borrowers will see their mortgage bill drop following the Bank rate cut - but the competitiveness of those deals still varies widely.

Lenders are announcing changes to their variable rates, in response to Thursday's move by the Bank of England.

The Bank's governor, Mark Carney, said banks had "no excuse" but to pass on the rate cut.

Customers on these products may have to wait until September or later to benefit from savings.

Meanwhile, for savers, analysts said that many providers had been withdrawing the most generous deals in recent weeks, even before the base rate cut, and this trend would continue.

"It is easy to see that decent savings deals are facing slaughter: repetitive cuts are just not practical for all providers to continue, so the only option left to limit the amount of cash coming in is to withdraw the best deals entirely and not replace them," said Rachel Springall, from financial information service Moneyfacts.

"Small providers that would have never envisaged being market leaders are slowly finding themselves near the top of the market, due to other providers falling out of the best buys.

"This has resulted in a vicious cycle of rate reductions so that they can move to a more mid-market position, or indeed withdrawing the deal entirely due to countless applicants."

The Bank of England announced a cut in its base rate to a record low of 0.25% from 0.5% on Thursday, and has signalled that a further rate cut is possible later in the year.

The Bank's ambition, in part, is for banks to pass this cut to their customers, putting more money in their pockets to spend and so stimulating the UK economy.

On average, this will mean a £22 cut on a monthly mortgage bill of about £779 for those on mortgage deals with rates that change. Those on fixed-rate deals - nearly half of UK mortgage holders - will see no change to their mortgage owing to the nature of these deals.

One in five mortgage customers are on tracker mortgages which move in relation to Bank rate changes. Many of those banks which have announced changes to these rates already say the cut will take effect on 1 September.

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Approaching a third of mortgage holders (29%) have home loans that are on the standard variable rate - the default option after a fixed term has run its course.

Whether this rate is changed depends on their lender - although banks are under pressure from the Bank of England to make a 0.25 percentage point cut.

A significant issue for customers to consider is not just whether the cut is handed to customers, but where this variable rate is set.

The average standard variable rate is 4.8%, but the rates range among UK lenders from 3.2% to 6.08%.

For example, RBS, the bank majority owned by the taxpayer, has a standard variable rate of 4%. After, saying it might take weeks to decide if and when it would make a cut, it has announced the cut would be handed on but have yet to decide when.

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