Lenders cave in to Government rate cut pressure

Permalink: Lenders cave in to Government rate cut pressure
by Kay Murchie

Following the Bank of England’s 1.5% rate cut yesterday, Britain’s lenders have begun to respond to Government and media pressure to pass on the full rate cut to borrowers.

This morning, the chief executives of Britain’s top banks were summoned to Downing Street to meet with Chancellor Alistair Darling, where he demanded that they pass on the rate cut to customers with immediate effect.

So far, Abbey, Bradford & Bingley and Lloyds TSB have announced that they will pass the full 1.5% rate cut to their tracker and standard variable rate (SVR) customers.

Since the breakfast meeting at No.10, however, the Nationwide, HBOS, the RBS/NatWest group and Northern Rock have all announced that they will cut their SVR rates by the full 1.5% on 1 December.

Nationwide is cutting its base mortgage rate by 1.5%, from 6.19% to 4.69%. RBS/NatWest is reducing its SVR by the same amount, from 6.69% to 5.19%.

Furthermore, HBOS is reducing its SVR from 6.50% to 5.00%, while the Nationwide said its borrowers would be considerably better off.

The decision from the banks has been welcomed by Prime Minister Gordon Brown who said families and businesses will now benefit.

Since the interest rate cut, however, around 30 lenders withdrew their tracker mortgage products from the market and it is likely that the few remaining will be withdrawn over the weekend.

The Bank of England’s decision to slash interest rates by 1.5% yesterday takes interest rates to 3% - the lowest level in over 50 years.

In the meantime, the three-month sterling Libor rate, a rate critical to the UK mortgage market, has today fallen from 5.56% to 4.49% - its lowest level since the end of 2005.