Lloyds TSB passes on 1.5% base rate cut in full

Lloyds TSB has confirmed that it will pass on today’s 1.5% cut in the base rate in full, to mortgage borrowers on its standard variable rate (SVR).

The bank had previously pledged that its SVR will never be pitched more than 2% above the Bank of England’s base rate.

Today’s reduction takes Lloyds TSB’s SVR down from 6.5% to 5% and the same cut will be applied at the lender’s Cheltenham & Gloucester subsidiary.

Other lenders are considering their position after the larger than expected cut in the base rate.

Some, including Abbey, hiked their tracker margins ahead of today’s interest rate review and only hours before the announcement was made, Lloyds TSB, Northern Rock and Woolwich withdrew some tracker mortgages for new customers.

The Council of Mortgage Lenders has been working hard on behalf of its members to explain that a reluctance to pass on cuts in the Bank of England’s base rate is not linked to profiteering.

Mortgage providers borrow on the wholesale money markets and are reliant on inter-bank lending to fund their businesses.

Three-month Libor, which is crucial to the UK mortgage market and has been at historically high levels during the credit crisis, fell today to 5.56125%.

However it remains 2.56% above the new base rate.

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