Should my "variable rate" go down as well as up?

geraintwd

I have a secured loan with a variable rate. Since taking out the loan, there have been 7 changes in the interest rate that I'm being charged, resulting in corresponding changes in my repayments. I have listed these changes below, showing the old and new rate as well as the variation in my monthly repayment (in brackets with a + or - sign).
Aug 2004 - 9.108% -> 10.108% (+ £23)
Apr 2005 - 10.108% -> 10.358% (+ £6)
Mar 2007 - 10.358% -> 10.858% (+ £12)
Jul 2007 - 10.858% -> 11.358% (+ £10)
Sep 2007 - 11.358% -> 11.658% (+ £6)
Nov 2007 - 11.658% -> 12.658% (+ £22)
Feb 2009 - 12.658% -> 11.658% (- £20)

I have checked this against historical rate change data from the Bank of England (sorry, can't post link as I'm a new user but you can Google it to check) and I have noticed that, while the loan interest dropped from 12.658% to 11.658% between Nov 2007 and Feb 2009, the BoE rate dropped from 5.5% to 1.0% over the same period (and subsequently dropped further to the current rate of 0.5%).

In light of this, should the interest on my loan have decreased by a proportionate amount?

Further, as the BoE rate was 4.25% at the time I took out the loan, and is now 0.5%, surely I should be paying less per month than I was originally, instead of being £59 per month higher than at the start of the agreement?

Clearly I am not a financial whiz, so my simple logic may not apply here, but I would welcome any input from anyone more experienced.

Thanks in advance.
Geraint

[Deleted User]

Technically they could, but they tend not to.

Variable rates tend not to track base rates outside of some mortgages. They are normally risk based, factoring in cost of business, profit, etc.

PasturesNew

Some loans are variable, linked to the BofE rate.
Some loans are variable, linked to a rate called the LIBOR rate.
Some loans are variable, linked to some other method, as defined in the contract.

The second of these tends to typically be higher and more changeable. They are different and separate systems.

Check your wording to see what it says the variable rate is based on. That's your starting point.

PeacefulWaters

Your lender does not raise money at BofE base rate. If they did there'd be some logic to your argument.

Could you remortgage to a new lender at a far lower rate?

iolanthe07

I have never known a variable rate to go down. In my experience they always 'vary' upwards. Which is why I would never take one out (except for a mortgage, where you don't have much choice).

Coveredinbees!!!!

My mortgage managed to go up even though the boe rate stayed the same but that's the RBS for you.

Playing_with_Fire_2

Generally a tracker has to follow the BOE/Libor rate both up and down.

A variable rate can do whatever the lender wants, unless there is something in the contract linking it to another rate.

Depending on what the penalty terms are and your credit history, you may be able to find a lower rate elsewhere and save some money.