A&L cuts standard variable rate by 0.25%

| October 22, 2008 | 0 Comments
A&L cuts standard variable rate by 0.25%

Alliance & Leicester (A&L) has cut its Standard Variable Rate (SVR) from 7.19% to 6.94%.

The 0.25% reduction applies from 30th October; existing customers on the lender’s SVR and those with SVR discounted loans will see their monthly payments change from 2nd November.

The bank is also advising borrowers with base rate tracker loans that rates will fall by 0.50% from 1st November.

The changes relate the Bank of England’s decision to cut the base rate by 0.5% earlier this month.

There has been strong criticism of lenders that have not yet reduced their SVRs in response to this but the majority of UK mortgage providers fund their businesses by borrowing on the wholesale money markets.

The interest they charge is therefore dictated more by interbank lending rates than the base rate.

Libor, the rate at which banks lend to one another, has remained stubbornly high since the collapse of Wall Street investment bank, Lehman Brothers, in mid-September.

However, there are indications this week that lending between banks is freeing up, following the bank rescue packages announced in the US and Europe last week.

The three-month sterling Libor rate, which is crucial to the UK mortgage market, was down to 6.085% yesterday, from 6.11625% on Monday, although the rate still remains well above the Bank of England’s base rate, at 4.5%.

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