just a handful of lenders agree to cut their svr
Banks told to pass on lowest rate since 1951
Published:
Pressure was mounting on banks and building societies last night to pass on the lowest interest rate for more than half a century to struggling businesses and families.
The Bank of England yesterday cut the rate from 3% to 2% – the lowest since 1951.
Chancellor Alistair Darling immediately welcomed the move and met with banking bosses to urge them to treat their customers fairly.
“I also said I wanted to see the interest rate reductions announced by the Bank of England passed on,” he said after the meeting.
Lloyds TSB and HSBC immediately announced a full 1% cut, and Woolwich, the mortgage arm of Barclays, which denied its customers the last cut in full, said it would slash 1.15% off its standard variable rate (SVR).
Nationwide said it was cutting its SVR by 0.69% to 4%, but pledged to pass on all future interest-rate cuts in full to SVR customers.
Only a handful of lenders have so far announced plans to cut their SVR.
Trouble-hit HBOS declined, after passing on all of the last cut, explaining it must balance the interest of its customers with managing its business prudently.
Its subsidiary, Halifax, Britain’s biggest mortgage lender, limited its reduction in SVR to just 0.25%.
There was also confusion over whether thousands of people with tracker mortgages will get a full cut.
But last night Nationwide vowed to pass on the rate cut in full to its tracker mortgage customers – despite having a 2.75% collar. The building society said it would also be waiving the clause in future and passing on future interest rate cuts in full.
It follows a similar decision by Halifax earlier in the day not to invoke an option on its tracker mortgage under which it no longer has to pass on all or any reduction once the base rate falls below 3%.
But many lenders hastily withdrew deals on offer for repricing, meaning new borrowers – badly-needed new home buyers – will lose out.
There were also warnings of the downside, as depositors, including many pensioners, will see their income from savings collapse.
But Inverness Chamber of Commerce chief executive Stewart Nicol was “delighted”. He said: “We hope the cut works through to the businesses who need finance.”
And Scottish Chambers of Commerce chief executive Liz Cameron hailed the BoE’s “bold stance” in the run-up to the crucial Christmas and New Year trading period.
She said: “It is to be hoped that it will not be long before interest rate cuts are passed on to business customers.
“It is important for the banks to use these lower interest rates as part of a wider package of support to Scottish businesses.”
Scottish Council for Development and Industry (SCDI) chief economist Iain Duff said the cut was essential to boost demand and confidence.
But he warned: “It is difficult to know whether even this will be enough to provide the required impetus as access to affordable finance remains extremely difficult for many companies.
“Recent announcements on support to small businesses from the main lenders are very welcome and SCDI would stress the importance of passing on the full extent of today’s rate cut to consumers and business.”
Shelter Scotland director Graeme Brown estimated a household paying a mortgage of £150,000 would see an average monthly saving of around £91, but warned: “Some mortgage lenders are still using the rate cut to protect their own profits rather than passing them on to hard-up homeowners.
“Shelter is calling on lenders to give struggling customers the best Christmas present they could have and urgently cut mortgage rates.”
David Strang Steel, of estate agent Strutt and Parker’s Banchory office, said the “shot in the arm” would only breathe new life into the property market if the banks pass on the rate cut and start lending again.
Aberdeen North Labour MP Frank Doran said: “It is absolutely essential and in the best interest of the banks themselves to get the economy moving.”
Finance Secretary John Swinney said the “widely welcome” move was in line with the Scottish Government’s “demand for a deep cut in interest rates to help our economy weather the current downturn”.
SNP treasury spokesman Stewart Hosie, MP for Dundee East, said any action on interest rates was welcome, but called on the UK Government to scrap a threatened £1billion cut in Scotland’s 2010-11 budget.
Homes for Scotland chief executive Jonathan Fair said action is needed before Christmas to boost the construction industry by buying completed and partly completed homes from the private sector and to “pump prime” new building sites “as a matter of urgency”.
The Bank of England rate fell to 2% during the 1930s slump and through and after World War II when Britain printed cardboard pennies to save on metal. It peaked at 17% in the “winter of discon-tent” under Labour in 1979.
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