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Record Low Base Rate Four Years On - The Winners And Losers

CHESTER, England, February 27, 2013 /PRNewswire/ --
  • With four years of low base rate -  78 per cent say i t's made them more financially aware and  10 per cent worse off due to lower savings rates
  • Introduction of Bank of England Funding for Lending Scheme has led to significant rate changes in mortgage and savings markets

With March 7 marking the fourth anniversary since Bank of England base rate dropped to a record low of 0.5 per cent, analysis by MoneySupermarket has shown that the cost of borrowing on mortgages and personal loans has fallen dramatically over the period, while savings rates have plummeted further since the Funding for Lending Scheme was introduced in August 2012.

Until the Funding for Lending Scheme was introduced, savers were benefiting from rates over six times that of base rate. In December 2011, the average top five easy access savings rate hit a high of 3.09 per cent but rates have dropped by over a third to just 1.93 per cent currently. Mortgage borrowers have fared much better, particularly for those looking to fix, with rates currently at an all-time low, while the number of products available to those with smaller deposits has continued to rise. However, the low base rate environment has led to over three quarters (78 per cent) of people saying they are more financially aware as a result of the base rate remaining flat according to a MoneySupermarket poll* of 2,000 site users.


In the mortgage market, rates are on the decline, dropping significantly since base rate fell. Average two-year tracker rates have hit a low of 2.50 per cent in February 2013, 0.81 per cent lower than in March 2009.  For fixed mortgages, average rates on two and three-year fixed rate mortgages have also declined following base rate cut, with rates falling to record lows of 2.34 per cent for a two-year fix, and 2.89 for a three-year fix. This is a drop of 1.45 per cent and 1.63 per cent respectively since March 2009. 

Although mortgage rates are at their lowest level ever, a MoneySupermarket site poll showed only seven per cent of respondents say they are better off due to lower mortgage rates.

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