There is more to setting mortgage rates than just the Bank of England’s interest rate, says the Council of Mortgage Lenders.

It says lenders set rates taking account of the underlying cost of funds (whether from wholesale sources or from retail savers), the cost of structuring the particular product, the cost of matching the maturity of their lending to the maturity of their funding, the costs of administering the account, the costs of holding the capital needed against the lending being done, and the risk they perceive inherent in the loan.

In addition to those considerations about the individual loan, lenders have to take account of their business as a whole, some of which is subject to expenses and costs that could not have been foreseen before the credit crunch and which affect the new business being written now.

CML director general Michael Coogan said: "It is utterly misleading to look at any individual benchmark rate – whether bank rate, Libor, or swap rate – and assume the margin between that rate and the mortgage rate is pure profit in the way that some recent commentary has implied.

"The real picture is not nearly so simple. Lenders face a broad range of pressures, both in terms of the cost of funds and the cost of liquidity management and capital. This is causing a change in the relationship between benchmark rates and mortgage rates in comparison with the pre-credit crunch era."

Not all lenders funded themselves in the same way, but most were relying more on retail savings than they used to, and the cost of attracting savers was relatively high.

Lenders were trying to balance consumer demand with pricing their business appropriately. Choice was beginning to widen but this was against the backdrop of funding markets which remained "dysfunctional and cautious".