Rate cut escalates building society war

Yorkshire, the UK's tenth-largest building society, yesterday piled the pressure on its rivals that are abandoning mutal status and converting into banks, by announcing a cut in its variable mortgage rates to a new low of 6.99 per cent, writes Nic Cicutti.

The society's move places it alongside Bradford & Bingley and Nationwide, which have already dropped the cost of their home loans to the same level.

Yorkshire's cut from 7.39 per cent, worth more than pounds 10 a month off the cost of a typical pounds 50,000 loan, takes effect on 1 April for its 150,000 borrowers on variable rates.

David Anderson, a general manager at Yorkshire, said: "There is now clear blue water emerging between those societies which intend to remain mutual and those which plan to, or have already converted to, plc status.

"We believe that lenders with external shareholders will inevitably give a worse deal to customers. The Yorkshire is optimistic that [our] investment levels will not need to be reduced following this latest move."

His comments come as three of the top four building societies - Halifax, Woolwich and Alliance & Leicester - prepare for a public flotation next year. All of them now charge 7.25 per cent to variable rate borrowers.

Separately, Woolwich Building Society yesterday sold its 16-strong chain of upmarket estate agents, Chestertons residential, for pounds 8m. The deal returns the chain to Chesterton International, the group which sold it to Prudential in 1986.