Mortgage costs up despite rate cut

Last month's rate cut by the Bank of England did not lead to the benefits some mortgage borrowers may have been hoping for, it has emerged.

Research by Moneysupermarket has revealed that the quarter-point cut in December has had "no effect" on fixed-rate mortgages and the average deal has instead increased from 7.3 per cent to 7.31 per cent.

Louise Cumming, head of mortgages at the price comparison website, noted that only low-risk mortgage borrowers have avoided a price increase on the cost of a new fixed-rate mortgage.

"I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England hadn't cut rates," she added.

Amid the damaging influence of the credit crunch on the money markets and financial institutions, research by Moneysupermarket last month revealed that 78 per cent of lenders have also failed to pass on the Bank's interest rate reduction on to their standard variable rate products.

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