Mortgage lenders that have not yet passed on Bank of England (BoE) base rate savings to their customers could attract the attention of the regulator as it carries out a study into mortgage competition.
The Financial Conduct Authority (FCA) has confirmed it's writing to all mortgage lenders to ask why they've made the decisions they have on standard variable rates (SVRs) for new and existing mortgage customers, following last month's BoE announcement that the base rate would be cut to a historic low of 0.25%.
While the majority of lenders we spoke to in the immediate aftermath of the BoE's decision vowed to cut the SVRs they offer as of 1 September, in line with the base rate reduction, there remain a handful of firms, including First Direct and Virgin Money, which are seemingly dragging their feet over passing on the saving to customers.
This is despite the fact that some of these have chopped the already meagre interest rates available to savers by up to 0.25%.
Which firms are most likely to attract the FCA's attention?
Many banks and building societies were quick out of the blocks with promises to reduce SVRs in line with the base rate cut. However, there are a few firms that haven't been as proactive in passing on the base rate saving...
- First Direct is planning to cut rates on its cash ISA by 0.4 percentage points for new and existing customers (from 1.30% to 0.9%) as of 18 October. However it's ruled out passing on the base rate savings to its SVR mortgage customers as it claims its current rate of 3.69% represents good value.
- Virgin Money previously told us that savings rates would not be reduced by more than 0.25 percentage points. A 0.25 percentage-point drop in its tracker mortgage will not apply for existing customers until 1 October. Virgin says this timing is "contractual" and would've applied if base rate had gone up. Customers with a Virgin SVR mortgage benefited from a 0.25 percentage-point reduction from 1 September.
- West Bromwich Building Society previously told us that savings accounts tracking the base rate will fall by up to 0.25 percentage points from 8 August and that other savings rates were under review. It's understood West Bromwich has no plans to reduce its SVR mortgage offering in line with the base rate cut.
- Halifax has already chopped its savings accounts tracking the base rate by 0.25 percentage points and, having undertaken a review, it has since confirmed that further savings rates cuts will be rolled out over coming weeks. The bank will not introduce its 0.25 percentage-point cut to its SVR mortgage offering until 1 October.
- Scottish Widows has also cut savings rates without yet reducing its SVR, which is not scheduled to drop from 3.99% to 3.74% until 1 October.
What does the FCA say?
It's not yet clear what, if any, action will be taken against banks and building societies that may be seen as not playing ball in terms of passing on base rate savings to mortgage customers.
However, an FCA spokesperson says: "We will be writing to all mortgage providers to understand how decisions on the standard variable rate for new and existing mortgage customers have been made in response to the change in the base rate. This will be fed into our market study of competition in the mortgage sector and our ongoing supervisory work."
The spokesperson declined to comment when asked whether it was targeting any particular firms.