LONDON (Reuters) – Major British banks are keeping most of their mortgage and savings rates on hold for now despite the Bank of England (BoE) raising borrowing costs for the first time in more than a decade on Thursday.
Britain’s largest mortgage lender Lloyds Banking Group (LLOY.L) said it would review rates after the quarter point rise in official borrowing costs but would not immediately change them except on products that explicitly track the BoE base rate.
“The Bank of England base rate is only one of the many factors that influence the cost of lending,” it said in a statement.
For around eight million Britons, Thursday’s rise was the first increase in official borrowing costs they have experienced in their adult lives, having grown up through an era of cheap credit and low savings rates.
UK Finance, Britain’s banking lobby, said for the majority of mortgage holders the rate change was unlikely to have a near-term impact given they are on fixed rates. It said that over the last year around two thirds of first time buyers had fixed their rate for up to two years.
The Resolution Foundation think tank estimated only around 11 percent of families in Britain currently have a variable rate mortgage – a reflection in part of a fall in home ownership as well as a shift towards fixed rate products. It calculated that the average increase in payments for a family with a mortgage of around 258,000 pounds ($338,000), if the hike is passed on, would be about 30 pounds a month.
Some building societies and smaller lenders are making changes to their rates, though.
Nationwide, Britain’s second-biggest provider of mortgages, said on Monday it would cut some of its fixed rate mortgages whatever the BoE did, although some of its variable rates will increase. It will pass on the 0.25 percent rise in rates to its savings customers, if they were hit by a similar decrease when the BoE cut rates in June 2016.
Yorkshire Building Society said it would pass on the full 0.25 percent increase to all of its variable savings accounts. Many of its mortgage customers on variable or tracker rates would also see their rates go up by 0.25 percent.
Reporting by Lawrence White and Emma Rumney; Writing by Rachel Armstrong; Editing by Mark Potter