BRITAIN’S lowest-ever bank base rate of 0.50 per cent celebrated its first anniversary this week, and while it has provided an easy ride for borrowers on cheap variable rate (SVR) mortgages, savers, however, saw their income almost wiped out.

Hannah Mercedes-Skenfield, of Moneysupermarket.

com, says: “Many borrowers are sitting on extremely low SVR rates, which many took when fixed-rate loans came to an end, and they have no incentive to move.”

Nationwide BS confirms the trend, and in its latest market bulletin says: “Since mid-2009, there has been a steady increase in the proportion of new loans taken out at variable, rather than fixed, rates.

“In July, the proportion of new loans taken out on baserate tracker or discounted variable rate deals hit a low of 14 per cent. By December, it rose to 39 per cent, with fixedrate deals down from 80 per cent to 54 per cent in the same period.”

Nationwide thinks buyers like variable rate loans because they want to keep more of their income each month.

Figures suggest fixed-rate loans cost 1.58 per cent more than variable rate deals.

Lenders, though, are starting to cut the cost of fixed-rate loans, and are launching them as a safe haven for borrowers unnerved by the sliding pound, General Election jitters and the long-term implications of Britain’s huge debts.

Post Office Mortgages’ new range of 75 per cent LTV (loan to value) loans includes a 3.19 per cent tracker and two, three and five-year fixes from 3.89 per cent.

Marco Hughes, Post Office’s personal lending director, says: “If you’re thinking about switching your mortgage, now is the best time to do it, before rates rise further.

With many SVRs at or above four per cent, there are already better deals out there.”

Martijn van der Heijden, head of mortgages at HSBC, says: “Mortgage rates are difficult to predict over the next few years, and volatility may be unavoidable.

“Borrowers who can’t absorb an increase of up to three per cent on their rate should seriously look to fix payments.”

HSBC fixed-rate mortgages range from two years at 3.69 per cent to five years at 5.29 per cent.

First Direct, HSBC’s online subsidiary, has a new lifetime tracker mortgage (maximum LTV 85 per cent) at 3.99 per cent, currently 3.49 per cent above the bank base rate. Borrowers with a 35 per cent deposit (LTV 65 per cent) pay 2.39 per cent.

First Direct also levies no early repayment charge if borrowers want to get out, possibly when rates rise, and into a fix.

Chelsea BS has new fixes too – 4.69 per cent for five years to a maximum 75 per cent LTV, or 5.04 per cent for an 80 per cent LTV.

Andrew Paddock, Chelsea BS mortgage product development manager, says: “With so much speculation about future levels of inflation and mortgage rates, people welcome an opportunity to fix payments at a competitive rate for five years.”

Santander, supplier of one in five new mortgages last year, is cutting rates on 80 per cent LTV deals. A two-year tracker at 3.25 per cent for two years, and a two-year fix at 4.95 per cent, with £995 fees, are for purchasers, rather than remortgagers.

In economic crises, variable rate loans can go wrong. Halifax SVR customers paid a huge 15.4 per cent – a record – in March to October 1990.

No one expects a repeat of that, and Barclays predicts the base rate could reach 6.5 per cent in the next five years.

However, there are severe problems in the mortgage market. Over the next four years, about £300bn in Government support to lenders, in the form of the Special Liquidity Scheme and Credit Guarantee Scheme, must be repaid. That suggests volatility in mortgage rates for years to come.