Leading lenders pledge to follow 0.25% base rate cut
The Bank of England’s Monetary Policy Committee has reduced the base rate from 5.5% to 5.25%.
The move had been widely predicted and could be followed by further and more aggressive cuts, should the slowdown of the UK economy gather pace.
Andrew McLaughlin, chief economist at Royal Bank of Scotland, believes “economic headwinds are becoming stronger and a more aggressive policy response may yet be required.”
Some analysts are concerned that today’s base rate cut will have a limited effect on the economy because not all mortgage lenders will pass the benefit on to homeowners.
Borrowers who do not have a mortgage product directly linked to the base rate may be disappointed and Michael Coogan, director general of the Council of Mortgage Lenders, says: “Borrowers should not expect that a base rate reduction will automatically result in a cut in standard variable rates or discounted rates across the market.”
However, a number of leading lenders have pledged to pass on the cut, including Halifax, Nationwide, Abbey, NatWest and Royal Bank of Scotland, all of which have announced they will reduce their standard variable rates.
Other lenders include Lloyds TSB and its Cheltenham & Gloucester mortgage business, Woolwich (Barclays’ mortgage arm), HSBC and First Direct had made the same promise before today’s announcement by the Bank of England.