Banks respond to rate cut

Oct 8 2008

THE Woolwich has joined Lloyds TSB and Halifax in passing on today’s unexpected cut in interest rates to mortgage customers in full.

Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, said it would be reducing its standard variable rate by 0.5% to 6.5% from November 1.

It has pledged that its standard variable rate will never be more than 2% above the Bank of England base rate, leaving it little option but to cut it.

Halifax followed in announcing that it would also be passing on the full 0.5% reduction to its standard variable rate (SVR) and tracker mortgage customers. The move, which comes into force on November 1, will leave its SVR at 6.5%.

Barclays, which operates its mortgage arm the Woolwich, became the third major lender to cut its SVR by the full 0.5% from November 1 for existing customers and from tomorrow for new ones.

If lenders do pass on the cut in full, it will knock around £47 off monthly repayments on a typical £150,000 mortgage, reducing repayments to £1,012.81 a month and saving consumers £570 a year, based on a new rate of 6.5%.

People who are heavily mortgaged with loans of £250,000 will benefit even more, saving £79 a month or £950 a year.

The rate reduction was welcomed by the Council of Mortgage Lenders (CML), alongside the other measures taken by the Government today to help the banking sector.

CML director general Michael Coogan said: "Today’s package of bank funding and capital measures is further strengthened by this rate cut.

"Not only are the tripartite authorities now pulling together decisively to address domestic confidence, but international central bankers are also collaborating much more effectively on their position.

"All this decisive action augurs well for an improving market situation looking ahead, even though no one is pretending the tough times are over yet."