Rate Watch: the best rates for mortgages, credit cards, savings and personal loans

17 October 2008

The government rescue of the high street banks and the 0.5% cut in bank base rate to 4.5% has done very little to improve mortgage rates for new borrowers, although with 800,000 borrowers on lenders’ standard variable rates there is relief for some.

Halifax, Britain’s biggest mortgage lender is cutting its SVR by the full 0.5%, bringing it down from 7% to 6.5%. Lloyds TSB and its Cheltenham & Gloucester brand, the Woolwich, which is Barclays’ mortgage arm, NatWest, Co-op Bank and Royal Bank of Scotland have all cut their SVRs by the full 0.5%, while Nationwide is shaving 0.3% off its SVR.

But only two building societies have passed on the full base rate cut to those on standard variable rate mortgages. The reasons are obvious. The Bank of England has effectively lost control of the money supply and banks are deciding the rates at which they will lend to each other.

Libor remains stubbornly well above bank base rate and all the time mortgage lenders are being forced to raise finance at around 6% they are clearly not going to cut mortgage rates. But not everyone sees it that way.

Louise Cuming, head of mortgages at moneysupermarket.com, points out that only a couple of building societies have cut their SVRs.

Mutual organizations are supposed to put their members first but they clearly haven’t in the past week,' says Cuming. 'People on SVRs are traditionally those who have struggled to get a mortgage, so they are in even greater need of some relief.’ This is not true.

Most people on SVRs are older borrowers coming to the end of their mortgage terms with relatively small balances outstanding, where the costs of remortgaging are greater than any benefit they might see from moving to a lower rate.

Source: citywire.co.uk/personal/-/news