So what now? What represents fair in terms of what the banks should now pass on to their customers?
Actually for those on SVRs, whether it is fair or not is neither here nor there. The mortgage is more affordable and that certainly is great news for those who came off a deal and were unable to remortgage.
It might just make the difference for some of those on, say, a Northern Rock Together mortgage who were struggling to make their payments on the SVR.
It is good news for those with trackers in that they will follow the rate cut down. A market with some banks having accessed Government money and with some which have not, or will not, is a strange one in competition terms. The former must pass on the full cut. Are all the rest under pressure to follow suit? The next few days will probably show us.
As for the future, for new borrowers – remember them, at least those with big deposits, or remortgagers with equity in property – will choice be increased and can the banks afford to do what the Government wants of them? Again this may depend more on Libor fluctuations than anything else.
There may eventually be some fixed-rate deals out there worth having as Libor falls and allows the banks to participate in this market once again. Of course, the need for advice on these deals will be great with lenders expected in some cases to chance their arm with high arrangement fees and the like.
Although many advisers have probably given up the fight in terms of the mortgage market, there is likely to be a customer need out there. It will be better, we suggest, to pay a fair fee to an adviser to look at the mortgages on offer than to pay an unfair fee to a lender.
Overall, we have to applaud the MPC for finally adjusting interest rates in manner which shows they understand the seriousness of the situation. We only wished they had done so a little bit earlier.