Last night none had done so, but Kenneth Clarke, the Chancellor, was quick to claim that the move reflected the Government's success in creating a low-inflation, low-interest-rate economy.
From 1 September new and existing customers of Nationwide will pay 6.49 per cent a year, reducing the cost of a typical pounds 50,000 repayment mortgage from pounds 326.03 to pounds 319.06 a month. It undercuts the Halifax, the Woolwich and the main clearing banks by 0.5 per cent and Abbey National by 0.55 per cent.
Until yesterday Yorkshire Building Society had the cheapest standard variable rate, at 6.59 per cent, although Northern Rock plans a cut to 6.49 per cent next month, and some direct lenders are cheaper still, with mortgage rates as low as 5.99 per cent.
Discount and cash-back mortgage rates linked to Nationwide's standard variable rate will also come down. The unexpected move revives the mortgage war and renews the rivalry between the banks and those building societies such as Halifax and Woolwich which are converting into banks and giving away cash and shares to members who vote for conversion, and those societies led by Nationwide which are determined to remain mutual societies and pass on benefits to customers in the shape of lower mortgage rates and higher returns on savings.
Nationwide has already made selective cuts in mortgage rates and maintained or increased savings rates at a combined cost of pounds 200m a year, nearly half its pre-tax profits of pounds 459m in the year to the end of March 1996.
Nationwide will also cut rates paid to savers, although the details had not been decided, the chief executive, Brian Davis, said. Rivals have been edging rates on selected savings accounts lower in recent weeks and most of them have cut rates three times this year compared to two at Nationwide.
Nationwide currently pays 4.2 per cent on a typical pounds 1,000 deposit in a 90-day notice account, compared to 3.15 per cent at Abbey National and 3.05 per cent at Halifax.Reuse content