The majority of the UK's leading banks have bowed down to Government demands and reduced their mortgage rates by the full interest rate cut of 1.5 per cent.
The Bank of England slashed interest rates to just three per cent on Thursday, a 53 year low, and many UK banks have surprised experts by agreeing to pass on the full cut.
Even before the rate cut was announced, Lloyds TSB
announced that it intended to pass on the whole rate cut, using the example cut of 0.5 per cent to demonstrate how it would affect customers.
And, true to its word, the bank, soon to become Lloyds Banking Group provided that its HBOS takeover goes ahead, cut its fixed rate mortgage
deals by 1.5 per cent. Abbey
was hot on the heels of Lloyds TSB with a similar announcement as Gordon Brown called for lenders to pass the rate cuts on. The last rate cut of 0.5 per cent took around a month to be passed on to consumers due to the inter-bank lending rate (Libor) remaining high. However, some banks have been quicker to pass on the cuts this time.
In fact, so far HBOS
, Nationwide, NatWest
, RBS, Lloyds TSB and Abbey have all reflected the cut in their mortgage
rates, leaving Barclays and HSBC as the odd ones out amongst the big high street banks.
The reason for the cuts may be that the three month Libor rate, which is often slow to fall, dropped over night on the news of the rate cut from 5.56 per cent to 4.49 per cent, giving the banks more room for manoeuvre.
Despite the good news, however, several leading lenders, including Lloyds TSB, were quick to temporarily withdraw their tracker mortgage
deals for review.
Commenting on the news, head of mortgages at moneysupermarket.com, Louise Cuming, said: "If the housing market is to recover long-term, lenders also need to coax new borrowers back in and to support existing customers coming to the end of their fixed or discounted deal.
"As new tracker mortgages are thin on the ground, there are more and more borrowers reaching the end of their deal who previously would have remortgages, but are now being forced onto their lender's SVR as they can't get a more competitive deal elsewhere."
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