Lenders 'review' rate cuts
Thursday 05 March 2009
Mortgage costs came down for tracker customers again today but few borrowers on standard variable rates are expected to benefit from the latest interest rate cut.
Lloyds TSB, Nationwide, Halifax, and Skipton Building Society all said they would be passing on the reduction in full to people on their SVR, while Abbey is reducing its rate by 0.45%.
But four of the groups pledge that their SVR will never be more than a set percentage above the base rate, leaving them little choice but to reduce it, while Abbey failed to pass on any of February's cut to its SVR borrowers.
Other lenders sat on their hands, saying their rates were "under review" following the latest 0.5% cut, which reduced the base rate to a new record low of 0.5%.
Banks and building societies have warned that they need to balance the needs of their borrowers with those of their savers, whose deposits they need to fund mortgage lending.
There are fears that the latest reduction will encourage savers to withdraw money from deposit accounts in a bid to find higher returns, further restricting the supply of funds available to banks and building societies.
Michael Coogan, director general of the Council of Mortgage Lenders, said: "This latest cut presents immense challenges for lenders whose margins are already squeezed as a result of previous reductions, leaving little scope to lower discretionary mortgage rates further.
"Savings are the lifeblood of mortgage lending, and unless lenders can offer competitive rates to savers their ability to offer new mortgages is restricted."
It is doubtful that today's cut will do much to support the ailing housing market, as it is unlikely to be passed on to new borrowers.
Gary Smith, vice president of the National Association of Estate Agents, said: "Interest rates can go down to 0% and I'm afraid it will make absolutely no difference.
"What is desperately needed now is more liquidity in the market and more mortgage lending.
"Reducing rates does nothing to boost confidence of savers and does nothing to help those that the banks are refusing to lend to. What we need is an increase in the number of mortgages available at sensible rates with limited deposits."
The majority of borrowers on SVRs are also unlikely to see their mortgage repayments falls.
Only a third of lenders passed on any of February's cut to their SVR borrowers and even fewer are expected to do so this time.
But around four million people with tracker mortgages should automatically benefit from the reduction.
A 0.5% cut reduces the monthly cost of a £150,000 mortgage by around £40, bringing the level of savings seen since the beginning of October to nearly £400 a month or more than £4,700 a year.
For people who are heavily mortgaged with a £250,000 home loan the reduction is even more dramatic, with total monthly savings rising by £65 to £657 since October, reducing mortgage repayments by a total of £7,880 over the course of a year.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
And why are 'southern' ways of speaking spreading north?
£1,430,000,000,000 (that's £1.43 trillion): Britain's personal debt timebomb
Banks are brought to account by switchers as growing number of people expect to be rewarded by their bank
How to start your own internet business
Five ways to make money on the internet
So what difference will the Autumn Statement make to your finances?
- 1 Cameron's freebie to apartheid South Africa
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 A forgotten episode in Russian history leaves links with the Philippines
- 4 Australian ultra-nationalist politician Stephanie Banister in car crash immigration TV interview
- 5 Nelson Mandela: From 'terrorist' to tea with the Queen
- < Previous
- Next >
iJobs Money & Business
£55000 - £70000 per annum: Pro-Recruitment Group: A well-known and renowned in...
£450 - £500 per hour: Cornwallis Elt : Business Analyst Finance System Hy...
£400 - £550 per day: Cornwallis Elt : BUSINESS ANALYST- OPERATIONS- PRIVATE B...
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
Day In a Page
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden