LENDERS are raking in an extra £20 million a month by maintaining high standard variable rates (SVRs) on mortgages, it has been claimed.
The average SVR is currently 4.66 per cent above the Bank of England base rate, this week kept at 0.5 per cent.
In contrast, SVRs (to which borrowers move when they come off fixed, tracker, discounted or capped rate deals) were typically around 1.9 per cent above the base rate before October, when the Bank of England began making cuts.
The difference has earned lenders over 20m in extra revenue a month, according to Richard Mason, managing director of Moneyextra.com, who accused lenders of failing to pass on savings to borrowers while keeping savings rates at a historic low.
"This is blatant profiteering by our banks, which are shoring up their balance sheets by charging huge rates for existing borrowers, but offering tiny rates to savers," Mason claimed.
"While a lot of deluded customers have recently taken advantage of a reduction in their monthly mortgage payments, they fail to understand that the full benefits of the rate cuts are not being passed to them."
Some SVRs remain as high as 5.99 per cent, with the majority between 4.99 and 5.79 per cent.
Some lenders have kept SVRs just than 2 per cent above the base rate, including Intelligent Finance, Cheltenham & Gloucester and Lloyds TSB, all owned by Lloyds Banking Group.
Mason accused banks of taking advantage of low consumer understanding of SVRs, with research suggesting that most borrowers did not know what the term stood for.
Moneyextra's research also found that more than four in ten Scottish borrowers believe the average SVR is only 1 per cent or less above base rate, with most assuming their costs had been cut in line with the reduction in interest rates. A quarter claimed that if their mortgage costs rose by 1 per cent, they would have to make sacrifices to survive.
Borrowers could be forgiven for expecting that if the base rate drops, their lender's rates would fall too, said Mason. "However current SVRs are entirely out of proportion and we implore the banks to bring down their extortionate lending rates to a level that is fair and just to the consumer," he said.