Interest rate cut will not be passed onto Rock customers

10 October 2008

Nationalised bank cuts its mortgage rates by just 0.15%

Northern Rock today became the first major bank to reveal that it will not be passing on last week’s 0.5% cut in UK interest rates to homeowners on a variable rate offer.

The lender, which was nationalised in February this year, this morning confirmed that it was reducing its standard variable rate (SVR) by 0.15% to 7.34% - one of the highest of the high street lenders.

“Northern Rock borrowers with very little or no equity effectively have nowhere else to go,” said David Hollingworth, of L&C Mortgages, the broker.

“Failing to pass on the full base rate cut will hit those borrowers that need the cut the most,” he added.

In contrast, the following lenders have all cut their SVRs by the full 0.5% last week:

Halifax (the UK’s biggest lender)
Bank of Scotland
Cheltenham & Gloucester (the lending arm of Lloyds TSB)
Woolwich (owned by Barclays)
Royal Bank of Scotland Group

Some other lenders, including Abbey, Nationwide, HSBC and Britannia, are still yet to announce whether or not they intend to reduce their rates as a result of the cut in the UK base rate.

“Larger lenders will have to pass on the full cut but the smaller ones might use the opportunity to pass on less to boost profit margins,” said Melanie Bien, director of Savills Private Finance, the broker.

“Building societies moved quickly after the last two rate reductions, so I am surprised that they are being so tardy, particularly as the Financial Services Authority will be playing close attention to what lenders do,” she added.