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Santander has been accused delaying passing on the Bank of England base rate cut to thousands of home loan customers in what could be “sneaky profiteering”.
The decision means the bank will collect a sizeable windfall given that many thousands of customers will have to wait for savings that might have been around £30 each based on a £200,000 mortgage.
It has emerged that the bank will not cut the interest rate for customers with a standard variable rate mortgage until December 3 – which is almost four weeks after the reduction by the Bank’s Monetary Policy Committee.
And it says the payable rate on tracker rate home loans, which are supposed to mirror the Bank of England base rate, will not fall until December 28 ‘at the earliest’.
The big banks made billions during the cost of living crisis when the Bank of England was pushing up interest rates to tame inflation. This was largely because they increased the profit margins they take in terms of the difference between what they paid to borrow money and how much they charged customers for home loans.
Home loan expert Rohit Kohli, Director at The Mortgage Stop, attacked the delay saying: “Borrowers will expect that when savings are made available via a Bank of England rate cut, they’re passed on promptly, not at the convenience of the lender.
“When rates go up, lenders seem to pass on the increase to borrowers almost instantly. But when rates drop, as we’ve seen with the recent Bank of England cut, passing on the savings takes much longer.
“Santander tracker customers, for instance, won’t see their rates fall until late December—almost seven weeks after the rate cut. While this might be standard practice, it raises questions about fairness and whether lenders are truly acting in the spirit of Consumer Duty.”
Stephen Perkins, Managing Director at Yellow Brick Mortgages, told Newspage: “Borrowers on trackers would rightly expect their next payment to reduce immediately following a base rate reduction, especially if there was, say, five working days between the interest rate cut and their next payment.
“For Santander to allow someone who makes their payments on the 20th of the month potentially to have two further months on the higher payment before seeing the benefit of the reduction flies in the face of Treating Customers Fairly.
“No doubt it’s covered somewhere in the small print of the tracker mortgage terms, but if rates were instead increasing I am sure there would be far more urgency for the changes to be reflected. Meanwhile I am sure savings products will have seen their interest rates reduced immediately.”
He said some other lenders, such as the Skipton, were passing on the rate cut within the next two weeks.
Ben Perks, Managing Director at Orchard Financial Advisers, said Santander appears quick to pass on rate rises but very slow when it comes to fall. This is known as a “rocket and feather” approach, where prices rise like a rocket but fall like a feather.
He said: “It’s interesting that, on the February 2, 2023 when the Bank of England increased the base rate, it took Santander just four weeks to implement the change. Now that rates have dropped, it will take over seven weeks.
“ In this day and age it can’t take so long to implement a rate change. Get on with it and help your borrowers save their hard earned money.”
Michelle Lawson, Director at Lawson Financial, said: “Most lenders will pass on the reduction within 28 days of the change so for Santander to have a wait time of almost two months is simply not right.
“Interestingly, following base rate rises in 2023, Santander upped the payments the next month. Is this in the spirit of Consumer Duty and Treating Customers Fairly? Any lender not passing on the reduction in payments in a timely manner isn’t in the spirit of the product itself.”
Justin Moy, Managing Director at EHF Mortgages, complained: “On the face of it, Santander seem to be taking way too long to pass on that base rate saving to their tracker mortgage clients.
“A decision made on November 7 will only be passed to the borrower after Christmas, but when base rate increased last year, Santander passed that on from the start of the following month, some four weeks earlier than a cut in rates.”
He added the question: “Sneaky profiteering Santander?”
When asked for a comment a spokesperson from Santander said: “When the MPC makes changes to the base rate, we apply any rate changes to our existing mortgages on 3rd of the month following the announcement.
“The go-live date for rate changes remains the same, whether there is a base rate increase or decrease, and regardless of what date the MPC decision is announced.”
Santander further clarified to the Express: “The lower rate is applied to base-rate linked tracker mortgage accounts from 3rd December, however it is only reflected in payments from 28th December. Any difference in rate is backdated accordingly.
“This is because the interest on the customer’s mortgage is calculated daily and charged monthly. If a customer’s interest rate changes on 3rd December, they will benefit from this change immediately in their interest calculations.
“When this takes effect in the customer’s monthly payment, it will depend on the proximity of their payment date to the rate change. The rate change will still be reflected in subsequent months’ payments.”