Others watch as Abbey trims its mortgage rate

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The Independent Online
Abbey National is cutting its mortgage rates in anticipation of further base rate reductions, but other lenders appear reluctant to follow.

The basic Abbey mortgage rate, which was due to drop from 10.7 to 9.95 per cent on 1 November, will now drop a further 0.35 percentage points to 9.6 per cent - a total cut of 1.1 points - but on 1 December. In the meantime borrowers will continue to pay at the old rate.

This is the lowest mortgage rate for 15 years.

Borrowers with a mortgage between pounds 60,000 and pounds 100,000 will get a further cut of 0.29 of a percentage point to bring the rate to 9.4 per cent, and those with larger mortgages will get the same cut to bring the rate to 9.2 per cent.

On a pounds 50,000 mortgage the monthly saving on the existing rate is increased from pounds 26.56 under the November rate to pounds 38.96 under the new rate for December - an extra saving of pounds 12.40.

John Bayliss, Abbey's managing director, said: 'Our view is that there is going to be a base rate cut. If there is a 0.5 per cent cut in base rates or no cut at all then these cuts will go ahead. But if there is another 0.5 per cent cut before 10 or 11 November then we would make a further cut.'

Halifax Building Society said it had no plans for a speedy cut. Nationwide said it was taking a 'wait and see' approach, and an Alliance & Leicester spokesman said: 'We are keeping an open mind over the next few days.'

Andrew Longhurst, chief executive of Cheltenham & Gloucester Building Society, said: 'Any rate reduction is good news for borrowers but I don't think this signals another general reduction in rates all round.'

Abbey said that savers' rates were under review. John Berry, marketing director, said: 'With inflation falling, savers are still getting a good real rate of return. We can't be way out of line on savings rates. It's a competitive marketplace. We are keen to stimulate the housing market.'

In January Abbey made a surprise cut in its mortgage rate from 11.5 per cent to 10.9 per cent, and was swiftly followed by Halifax and Nationwide. But the expected base rate cut never came and lenders were battered by strong competition from National Savings.