The Bank of England left interest rates unchanged at 5.5% yesterday, as fresh evidence emerged that mortgage borrowers were not yet getting the full benefit of December’s quarterpoint cut. Financial Times

The Bank’s survey of quoted mortgage rates at the end of December showed rates on most fixed-rate mortgage products had changed little over the month, despite a lower official rate and a decline in twoyear swap rates, which determine lenders’ funding costs.

'The fact that mortgage spreads are rising while housing activity plunges makes it clear that this is not just a story of weak housing demand but also reduced credit supply,' said Michael Saunders, economist at Citigroup.

Alan Castle, at Lehman Brothers, noted that lenders had passed on more of the rate cut in floating-rate products, especially for lower risk borrowers. But George Buckley, at Deutsche Bank, said: 'Retail mortgage interest rates are not falling as quickly as the decline in market rates might suggest under normal circumstances.'

The monetary policy committee’s decision to leave rates on hold matched analysts’ expectations, although markets had priced in the higher possibility of a cut.