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Northern Rock mortgage customers only get half the base rate cut

09 December 2008 / by Rachael Stiles
Nationalised bank Northern Rock has only passed on half of the Bank of England's one per cent cut in the base rate to some of its mortgage customers, despite being owned by the Government.

After giving "careful consideration to both borrowers and savers", Northern Rock has decided that existing customers with tracker mortgage will get the full one per cent cut, but those on a standard variable rate will only see their payments go down by 0.5 per cent, to 5.34 per cent, with effect from January 1.

For those mortgage borrowers who qualify for a loyalty discount of 0.25 per cent below their SVR rate after seven years, their new rate will be 0.5 per cent lower, at 5.09, per cent with effect from the New Year.

After November's dramatic base rate cut, Northern Rock reduced its SVR mortgage rates by the full 1.5 per cent but did not cut rates for its savings account customers.

However, "following the further reduction in the base rate in December, a number of changes to savings rates are now being made," said Northern Rock in a statement.

It will reduce its savings SVR by a combined two per cent when taking into account the two base rate changes.

Both Gordon Brown and Alistair Darling have made public appeals to the banking industry, urging them to reflect the Bank of England rate cuts in their mortgage ranges to ease the pressure on stretched household budgets or face legislative action, so Northern Rock's decision not to pass on the full one per cent cut will be a cause of embarrassment for the Government.

Since the base rate decision was announced last week, 12 of the top 20 mortgage lenders have cut their SVRs but only five have passed on the full one per cent cut.

Lenders are contractually obliged to change the rate of their tracker mortgage range in line with the Bank of England base rate, but SVR products can generally be moved up and down at their discretion.

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