Lloyds and Nationwide only lenders to pass on double rate cut of 2.5% to SVR mortgage customers

05 December 2008 / by Rachel Mason
Lloyds TSB and Nationwide are the only lenders to pass on both the 1.5 per cent cut from November and the 1 per cent cut yesterday onto their Standard Variable Rate mortgage customers.

Following the Bank of England's decision to slash the base rate this month from 3 per cent down to 2 per cent – the lowest rate since 1951 – Lloyds TSB mortgages immediately announced it would be passing on the full benefit to its SVR mortgage customers.

Nationwide mortgages initially announced it would pass on a cut of just 0.69 per cent, but late on Thursday said it would be passing on the full 1 per cent cut.

Last month, when the Bank of England made the decision to cut the rate by a massive 1.5 per cent, Halifax, Bank of Scotland, Abbey, Northern Rock, RBS, Bradford and Bingley, Coventry and Clydesdale & Yorkshire all passed it on in full.

But following yesterday's announcement of a further 1 per cent cut, only Lloyds TSB and Nationwide Building Society have so far said they will do the same again, taking the Lloyds TSB SVR mortgage down to 4 per cent and Nationwide's down to 3.69 per cent – the lowest on the market.

Barclays has said it will pass on a cut of 1.15 per cent, but it made no change to its rate following November's cut. HSBC Bank and Bristol and West have also announced they will pass on the full cut of 1 per cent this month, but both failed to pass on the full 1.5 per cent last month.

Halifax has disappointed its customers by announcing it will only pass on 0.25 per cent of the 1 per cent cut, while the majority state-owned Royal Bank of Scotland group, which includes NatWest has said it would not be passing on the cut either.

RBS says that instead, it will adjust its rates by an amount that would strike "an appropriate balance between the interests of savers and borrowers in any decision it makes".

Louise Bond, personal finance manager at uSwitch.com says that although some lenders have already announced that they intend to pass on the full benefit of the rate cut to existing customers, they are likely to represent the exception rather than the rule.

"Following November's 1.5 per cent reduction, just 11 providers reduced their SVR rate by the full amount, the average drop being just 0.96 per cent. More alarmingly, nine providers reduced SVRs by less than 0.5 per cent," she said.

But, says Ms Bond, although "sluggish in their response", lenders' SVRs are slowly coming down.

"Consumers that previously reverted to the SVR rate were facing an expensive option to be avoided at all costs. Now this is proving to be an increasingly competitive option."

However, she says the situation is becoming increasingly complicated for new customers.

"It seems SVR products have proved a bit too popular for comfort and 22 providers, with an average SVR 5.5 per cent, have closed these ranges to new business. In fact, of the six providers at the competitive end of the SVR market with rates at less than 5%, just four are open to new business."

The vast majority of lenders have, however, passed on the full 1 per cent cut onto their tracker mortgage customers.

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