Halifax passes on only a fraction of rate cut to mortgage holders
The Halifax, Britain's biggest mortgage lender, will not pass on the full cut in interest rates announced by the Bank of England on Thursday.
HBOS – which owns Halifax, Bank of Scotland and Birmingham Midshires – said yesterday it plans to reduce its standard variable mortgage rates by just 0.1 per cent from 1 March.
With most of the UK's major lenders waiting until next week to decide their responses, HBOS's move makes it likely that mortgage rates for millions of borrowers will not be cut by the full amount suggested by the Monetary Policy Committee's surprise quarter-point reduction.
A 0.1 per cent cut to 5.65 per cent shaves just £3.02 off the average Halifax mortgage of £50,000.
HBOS, whose chief executive is James Crosby, said its rates were already among the most competitive of the major lenders, and Nationwide Building Society is the only top 10 lender with a lower standard variable rate.
An HBOS spokesman said: "We are priced in line with the market. We have matched the cut on each of the last seven occasions when the MPC has cut rates. Our competitors haven't."
Analysts said the scope for HBOS to cut mortgage rates has reduced because savings rates – which would have to be cut to maintain profit margins – are so low. HBOS is reviewing its savings rates, but will not announce a decision until the end of the month.
Michael Lever, banking sector analyst at CSFB, said: "In many cases, rates are already infinitesimally small and given the competitive pressure, the scope to cut savers' rates still further is quite constrained."
With the Halifax's survey showing annual house price inflation running at 25 per cent, the Bank of England is gambling that its base rate cut will not add fuel to an unsustainable boom.
Economists welcomed HBOS's restraint but argued that, with rates already at their lowest since the Fifties, the marginal impact of a cut on affordability is likely to be small.
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