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Money: Let's lean on the lenders

Another month, another rate cut. For those interested in records, the new Bank of England rate of 5.25 per cent is is the lowest for 27 years. Before you rush out and spend, spend, spend, there's very little to shout about. Millions of us are stuck on fixed-rate mortgage deals, and many borrowers on variable rates won't see any change in the amount they pay out each month.

Many lenders have decided the rate-cut party for borrowers is over. They won't be passing on the latest savings. They have let things get as exciting as they feel appropriate, and now it's time to sober up. Like parents at a teenager's party, they leave us the alcoholic punch and go out for the evening - only to return in time to turn up the lights at midnight.

The banks have acted to protect their margins. This is the profit they make and is basically the difference between what they pay you as interest on your savings (not much) and the interest you pay them for a home loan (quite a bit more).

Normally journalists receive a flurry of calls and press releases from banks and building societies after a rate cut is announced. All trumpet their intention to drop standard mortgage rates. This time the rate cut was greeted in silence.

The Halifax and the Abbey National have now said they are reviewing the situation before they cut their rates. It looks as if they are waiting to check the reaction to bolder rivals such as the Bradford & Bingley, the beleaguered building society. The B&B said it wasn't changing its mortgage and savings rates because: "We think now is the time for the market to better support the needs of savers."

This is a disappointing stance, coming in the month when the B&B asks its members to vote for it to remain a mutual. Surely it ought to be aiming to please absolutely everyone at this crucial moment? I know it looks like a cheap bribe but the society should be taking a hit by passing on the slight mortgage rate cut and keeping savings rates steady.

And why is this so hard? Virgin Direct, ever publicity savvy, has said its mortgage rate will go down by 0.25 per cent and the savings rate will hold at 5.75 per cent. Yet again it's the newer lenders that take the lead. They are highly automated, have no branches and work on much lower profit margins (or no margins at all; they just want to build databases of potentially lucrative customers).

So something has to give. Either the traditional lenders will have to rebuild their profit models and make less money, or we will have to put up with a variable rate over 6 per cent - however low bank rates go this year. Rates on new fixed-rate deals are also starting to creep back upwards.

Don't bleat for the lenders. The Halifax is so rich it's buying back millions of its shares. It's about time savers and borrowers demanded a bit more from our bloated institutions.