Lloyds TSB cuts cost of mortgages

Lloyds TSB announced today that it would be passing on today's unexpected cut in interest rates to mortgage customers in full.

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The group, which also lends under the Cheltenham & Gloucester brand, said it would be reducing its standard variable rate by 0.5 per cent to 6.5 per cent from 1 November.

Existing customers with tracker rate mortgages will also automatically benefit from the change, while the cost of tracker deals for new customers is currently under review.

Lloyds TSB pledges that its standard variable rate will never be more than 2 per cent above the Bank of England base rate, leaving it little option but to cut it.

Britain's biggest lender Halifax said that it would also be passing on the full 0.5 per cent reduction to its standard variable rate (SVR) and tracker mortgage customers.

The move, which comes into force on 1 November, will leave its SVR at 6.5%.

But other banks appeared to have been caught by surprise by the Monetary Policy Committee's decision to announce the outcome of its rate-setting meeting today rather than tomorrow.

All of the UK's other major lenders said they currently had their rates under review.

If lenders do pass on the cut in full, it will knock around £47 off monthly repayments on a typical £150,000 mortgage, reducing repayments to £1,012.81 a month and saving consumers £570 a year, based on a new rate of 6.5 per cent.

People who are heavily mortgaged with loans of £250,000 will benefit even more, saving £79 a month or £950 a year.

The rate reduction was welcomed by the Council of Mortgage Lenders (CML), alongside the other measures taken by the Government today to help the banking sector.

CML director general Michael Coogan said: "Today's package of bank funding and capital measures is further strengthened by this rate cut.

"Not only are the tripartite authorities now pulling together decisively to address domestic confidence, but international central bankers are also collaborating much more effectively on their position.

"All this decisive action augurs well for an improving market situation looking ahead, even though no one is pretending the tough times are over yet."

Barclays later announced that its mortgage arm the Woolwich would also be cutting its standard variable rate by the full 0.5 per cent from 1 November for existing customers and from tomorrow for new ones.

Andy Gray, head of mortgages at the Woolwich, said: "The base rate cut is a welcome move for millions, set against the background of a slowing housing market.

"Today's move to reduce mortgage payments is good news and will instil confidence, helping customers with their finances."