CML responds to Which? variable rate claims
Thursday, 23 June 2011 2:18 PM
The Council of Mortgage Lenders (CML) has responded to claims by Which? that lenders are not passing on base rate changes to customers with a direct message to borrowers.
The CML said it wanted to remind borrowers that mortgage markets have “changed fundamentally” as a result of the financial crisis and to reinforce that base rate is no proxy for the cost to lenders of raising funding.
The response follows a study from Which? that found that 95 per cent of lenders failed to fully pass on cuts in the base interest rate to their Standard Variable Rate (SVR) mortgage customers.
The CML said that since 2008, lenders have been operating in market conditions that have changed significantly, with a shortage of funds, new requirements to hold more capital and liquidity, and increased pressures to help borrowers in difficulty while mortgage arrears are expected to increase.
Michael Coogan, CML director general, said: "Lending rates are fundamentally driven by the cost of funds, not the base rate, although the two were more closely correlated before 2008. But this apparent historical relationship has been blown apart by the move to an unprecedented low base rate since March 2009.
"For borrowers anticipating difficulty, however, the message remains unchanged. They should speak to their lender as soon as possible if they are struggling to meet their repayments, and lenders are committed to helping them wherever they can do so."
Want to be the first to know when we break a story? Follow @AboutProperty on Twitter and subscribe to our free weekly newsletter.
