Lenders slow to pass on interest rate cut

Mortgage lenders were slow to respond to today's 1 per cent interest rate cut with just four groups saying they would be reducing rates for their borrowers.

HSBC, Lloyds TSB, Barclays' lending arm the Woolwich and Bristol & West all said they would be reducing their standard variable rate (SVR) by at least the full 1 per cent, while other lenders continued to keep their rates under review.

But there was good news for more than half a million Halifax tracker customers when the group announced that it would be passing on all interest rate cuts to them in full.

Tracker mortgages automatically move up and down in line with the Bank of England base rate, but a clause in the Halifax deal gave it the option not to pass on all or any reductions once the base rate reached 3 per cent.

The move follows speculation that City watchdog the Financial Services Authority could force the group to pass on the cut as borrowers had not been made aware of the clause when they took out their mortgage.

The FSA warned earlier in the week that such clauses would be unenforceable if they were not included in the Key Facts Illustration which is given to borrowers when they arrange a loan.

Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, was the first lender to announce a reduction, saying it would pass on the full cut ahead of news of the Monetary Policy Committee's decision.

The move reduces the group's SVR to 4 per cent, although as it pledges that the rate will never be more than 2 per cent above the base rate it had little choice.

HSBC and its lending subsidiary first direct, and Bristol & West and Bank of Ireland, which are part of the same group, were also quick to announce the reduction.

They were joined later in the day by the Woolwich, which is reducing its SVR by 1.15 per cent, after failing to pass on any of November's cut to borrowers.

But despite the early announcements, the majority of lenders are not expected to pass on today's reduction in full to their SVR customers.

Three-quarters of groups with an SVR failed to cut their rates by the full 1.5 per cent following last month's cut, with a handful of lenders not reducing their SVR at all.

Ray Boulger, senior technical manager at John Charcol, said: "While borrowers may have received the news of another significant rate cut with hope, I expect very few lenders to pass on the whole of this month's cut, with most reducing their SVRs by between just 0.25 per cent and 0.5 per cent.

"Some who were coerced by the Government into passing on all of last month's 1.5 per cent cut against their better commercial judgment may choose to be parsimonious this time, unless there is further Government browbeating."

Around 600,000 borrowers with tracker mortgages will also not benefit from the full reduction due to collars, under which lenders do not have to pass on cuts once the base rate falls below a certain level.

Nationwide has a collar which kicks in at 2.75 per cent, meaning its tracker customers will benefit from only 0.25 per cent of today's cut, while the Skipton and Yorkshire Building Societies have one of 3 per cent, meaning borrowers will not see any reduction.

But the UK's other estimated 3.3 million tracker customers will automatically benefit from the fall in rates, saving people with a £150,000 mortgage around £85 a month, while those with a £250,000 one will be £142 a month better off.

Lenders scrambled to withdraw their tracker deals following November's surprise 1.5 per cent cut, but so far only Lloyds TSB, which pulled the products yesterday, Abbey and Alliance & Leicester have withdrawn their ranges for repricing.

While the rate cut is likely to be good news for some borrowers, it is bad news for savers, particularly retired people who rely on deposit returns for their income.

Adrian Coles, director general of the Building Societies' Association, said: "Savers will be disappointed at today's news.

"Building societies which pass on both this base rate reduction and the last could halve the interest which they pay to their investors in a very short period of time."

Sport
footballLIVE City face Stoke, while Warnock returns to Palace dugout
Life and Style
3D printed bump keys can access almost any lock
gadgets + echSoftware needs photo of lock and not much more
News
i100
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
PROMOTED VIDEO
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
i100
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

    £35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

    DevOps Engineer (Systems Administration, Linux, Shell, Bash)

    £50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

    Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

    £60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

    Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

    £50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone