Skipton cuts mortgage cost

Skipton Building Society, which stunned the mortgage market earlier this year by offering free unemployment insurance to its borrowers, yesterday unveiled the cheapest variable rate repayment mortgage of Britain's top 20 societies with a figure of 7.49 per cent, writes Nic Cicutti.

The decision cuts about pounds 11 off the cost of an average pounds 50,000 mortgage. The society has also moved to narrow the gap between mortgage and savings rates even further by increasing rates paid to some instant-access account savers.

Skipton has added a new tier offering 6.5 per cent gross on savings above pounds 30,000 and pledged yesterday that even if it were forced to cut rates to its 300,000 savers it would try to do so by less than other lenders.

John Goodfellow, chief executive at Skipton, yesterday challenged other lenders to follow his example. "Our current profitability is strong and this is set to continue throughout 1996," he said. "Our capital position is strong and I believe that now is the appropriate time to reduce margins for the benefit of all our members."

The move to cut 0.5 per cent off the existing rate will come into effect for the society's 60,000 existing borrowers on 1 February next year, one month after other lenders, who cut their own recently. But Skipton claimed that the difference in starting dates would only add a fraction to borrowers' bills. David Charlton, assistant general manager at Skipton, said falling bad debt provisions for societies meant that all should now be prepared to lower their margins further.

Skipton's move came amid hints that lenders will not raise mortgage rates even if Kenneth Clarke, Chancellor of the Exchequer, does not lower base rates later today.