The recent monthly meeting of the Bank of England’s Monetary Policy Committee (MPC) ended with the standard base interest rate being left alone for another month.  The current 0.5 per cent interest rate was set in March 2009 when it was moved downward from the then 1.0 per cent rate.  This leaves borrowing cheap as far as the MPC is concerned but lenders are not helping out consumers.

The cost of lending has increased according to lenders and that increase in cost can no longer be solely absorbed by the lending market.  The cost is being shared with new borrowers as well as current customers.  Some of the lenders gave notice that in the first of May they would be raising their standard variable rate (SVR).  This is especially a concern to homeowners that converted to their lender’s SVR when their current mortgage deal ended and they did not remortgage.  New borrowers are facing higher interest rates as offerings are pulled and replaced with higher rates.  Homeowners looking for remortgages are therefore likely to be seeing higher interest rates than what they could have expected to find months ago.

Lenders are increasing the cost of borrowing in the mortgage lending market in the midst of news that the economy has slipped into a second recession.  The double dip recession was a reality after the last quarter in 2011 and the first quarter of 2012 both revealed a contraction in economic growth.

While economists believe the weak economy will lead to the MPC leaving the standard base interest rate set at 0.5 per cent until possibly 2013 or 2014, they expect that lenders may continue to pass along the rising cost of doing business in the lending market to consumers through raising interest rates on offerings.