The Great Rate Race: Why Do Banks Play Favourites with Interest Rates?
Ever noticed how quickly your savings rate drops when the Bank of England cuts rates? It’s almost like the banks have their finger hovering over the “decrease” button, waiting to pounce. Yet when it comes to passing on those same cuts to mortgage holders, suddenly everything moves at a glacial pace. Let’s dive into this fascinating (and frustrating) phenomenon.
The Speed of Light vs. The Speed of Banks
Here’s a stark reality: When the Bank of England announces a rate cut, many savers see their returns plummet within hours – sometimes even minutes. We’ve tracked instances where major banks adjusted their savings rates downward before the ink was dry on the Bank of England’s announcement.
Meanwhile, if you’re a mortgage holder, you might want to grab a cuppa and get comfortable. Those same banks often take weeks, sometimes months, to reflect rate cuts in their mortgage products. It’s a bit like watching paint dry, except the paint is your monthly mortgage payment staying higher than it should be.
The Numbers Tell the Story
Take the November 2024 base rate decision. Within hours of the Bank of England’s announcement, several major banks had already adjusted their savings rates downward, citing “market expectations.” Yet their mortgage rates? Nearly a month later, many were still “reviewing their position” or making minimal adjustments. It’s a pattern we’ve seen time and time again.
Why the Double Standard?
Banks often justify this disparity with complex explanations about funding costs, market dynamics, and operational procedures. But let’s be honest – it’s hard not to see this as a classic heads-I-win-tails-you-lose situation. When rates go up, mortgage rates rocket skyward faster than a SpaceX launch. When they come down, it’s like watching a feather float to earth.
What Can You Do About It?
- Stay Informed: Knowledge is power. Keep track of Bank of England announcements and watch how your bank responds.
- Vote with Your Feet: Banks count on customer inertia. Don’t give them that satisfaction. If your bank is dragging its heels on rate cuts, it might be time to explore your options.
- Consider Remortgaging: Sometimes the best response to slow-moving banks is to take your business elsewhere. A new deal with a different lender might save you money even before your current bank gets around to passing on that rate cut.
The dwello Difference
At dwello, we believe in cutting through the banking smoke and mirrors. That’s why we track these rate movements obsessively and help our clients navigate the best times to lock in new rates. We can’t change how banks operate, but we can help you play the game better.
Ready to stop waiting for your bank to do the right thing? Let’s talk about your options. At dwello, we’re not just observers of the market – we’re your active partners in getting the best possible deal.
The information contained in this article does not constitute financial or mortgage advice from Dwello Mortgages. It is provided for general informational and educational purposes only. No information contained constitutes a solicitation, recommendation, endorsement or offer by Dwello.
Dwello is not making any representations or warranties, and assumes no liability, for the content provided in this article, including any third party information. Consumers should always consult their own financial advisors before making any mortgage or remortgage decisions based on this type of general market commentary and analysis.
All mortgage pricing, rate scenarios and cost comparisons used are hypothetical examples. Actual rates, fees and mortgage costs may vary based on the specific lender and the individual borrower’s personal financial circumstances.
Dwello Mortgages, a trading style of Dwello Mortgages Limited is an appointed representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Dwello Mortgages Limited is registered in England and Wales with company number 14432864. Registered Office: St James House, Hollinswood Road, Telford TF2 9TW
