Alliance decides to hold mortgage rate

HOME BUYERS look like being spared a general rise in mortgage rates after the third-biggest building society, Alliance & Leicester, announced yesterday that it was cutting savers' rates by an average of 0.3 percentage points before tax, writes Vivien Goldsmith.

The society has no plans to move its mortgage rate. John Day, assistant manager (marketing), said that the housing market was fragile, adding: 'It doesn't need any more bad news.

'We would be very reluctant to see an increase.'

Building societies have seen money flow out with vigorous competition from National Savings. But the latter has withdrawn most of its products and will relaunch them on 24 August with rates cut by at least 0.5 per cent.

The small Skipton society responded to the competition on Tuesday by raising its savings and mortgage rates.

But the larger societies are keen to keep the mortgage rate down and are planning savings cuts. Alliance's move to reduce savings rates follows the lead of Nationwide and Bradford & Bingley. Britannia, another top 10 society, said yesterday that it also planned to cut returns for savers.

The largest building society, Halifax, is also keen to avoid a mortgage rise and said savings rates were 'under review'.