Leading lenders honour base rate cut

Today’s decision by the Bank of England to cut the base rate from 5.25% to 5% has met with a swift response from some of the UK’s leading mortgage lenders.

Barclays, Lloyds TSB, HBOS and Nationwide have all pledged to reduce their standard variable rates from 1st May, for existing customers.

RBS/NatWest and HSBC have not yet committed themselves but have said they will be reviewing their variable rates.

The quarter percentage point reduction had been widely predicted, as concerns about a slowdown in the economy and housing market crash continued to mount.

Earlier this week, Halifax reported a 2.5% fall in the average price of a home in March.

The decline, which compares with a drop of 0.4% in February, was the sharpest monthly fall since September 1992.

Base rate changes are not always passed on to homeowners on variable interest rates, as most mortgage lenders rely on the wholesale money markets for funding.

This means they are restricted by Libor, the interest rate at which banks lend to one another.

Libor has reached historically high levels during the credit crisis but did ease slightly this week, after the Bank of England raised the money it will make available to the markets in April by £5 billion, to £15 billion.

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