Nationwide opts out of base rate cuts

Nationwide Building Society has announced that it will no longer pass on cuts in the Bank of England’s base rate to the majority of its tracker mortgage customers.

Despite Government pressure to keep the cost of borrowing in line with reductions in the base rate, the lender is invoking a clause that allows it not to follow the base rate once it falls below 2%.

The move will affect around 250,000 homeowners and is designed to protect Nationwide’s savers who have been losing out since the Bank began to cut the base rate aggressively, in November.

According to its mortgage small print, the building society could have evoked the “collar” or “floor” when the base rate fell below 2.75% but instead passed on December’s 1% reduction in full.

At the same time it cut savings returns by an average of 0.87%.

A spokeswoman has explained that concern for savers means the building society has taken today’s action to avoid being forced into a position where it has to cut savings rates more aggressively than it would choose.

The Bank of England’s Monetary Policy Committee will be meeting next week to decide on rates for January.

Analysts are expecting a further cut of between 0.5% and 0.75%.

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