Mortgage lenders’ speedy response to base rate cut
News of a cut in the Bank of England’s base rate, from 5.75% to 5.5%, has been swiftly followed by announcements from leading mortgage lenders.
Analysts had suggested that a reduction in the base rate may be ignored by lenders anxious to protect profit margins as the credit squeeze continues.
However, both Halifax and Nationwide have cut their standard rates in line with the base rate decrease, reducing monthly payments on a £100,000 mortgage by between £15 and £20.
Halifax, which is the UK’s largest mortgage lender, was the first to respond to the news and has reduced its standard variable rate (SVR) from 7.75% to 7.50%.
Nationwide also passed on the full amount of the cut, reducing its base mortgage rate from 7.24% to 6.99%.
The lower rates will be available to new customers immediately and will come into effect for existing borrowers on 1 January 2008.
First Direct has also announced that it will pass on the full interest rate cut to new and existing customers, with immediate effect. The lender’s SVR now stands at 6.5%.
The speedy response from Halifax and Nationwide will no doubt put pressure on other lenders to reduce rates but while customers on tracker mortgages will see their mortgage payments fall, homeowners who have fixed-rate mortgages see no change.
The Council for Mortgage Lenders (CML) has applauded the move and pointed out that it will “reduce the risk of payment shock for the 1.4 million borrowers coming off fixed-rates in the next year”.
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