Lenders fail to pass on rate cut

Major lenders are holding on to some of the rate windfall

Some of the biggest names in mortgage lending have failed to pass on the whole of a quarter-point base rate cut to their borrowers, following the last Bank of England decision.

Abbey National, Cheltenham & Gloucester and Alliance & Leicester have all cut less than the full 25 basis points off their standard variable rates.

Critics say that lenders are not only letting down their customers, but harming attempts to stave off a recession following the attacks in America on 11 September.

"This is very disappointing. The Monetary Policy Committee cut rates to help the economy. They are not following the lead that they have been given to stave off a recession," said Jane Harrison of London & Country, a mortgage broker.

Winners and losers

Abbey National, the second largest lender - worth £67.9bn in assets - made the smallest cut.

Its standard variable rate customers will pay 6.65% from 1 October - just 10 basis points less.

A spokesman for Abbey National said: "Because rates are very low, we wanted to protect our savers, to strike a balance between the rates that are cut this time round."

Savers miss-out

C&G is another. It has not passed on the full saving to its mortgage customer, while its sister company Lloyds TSB has cut rates on two savings accounts by a quarter point.

It has cut 35 basis points off its 90 Day Notice account and Instant Gold Savings accounts.

This now means that £2,500 in an Instant Gold account will now attract interest at 1.65%.

Less than full rate cuts

Abbey National: 0.1

C&G: 0.2

Alliance & Leicester: 0.14

Woolwich: 0.2

A spokesman for Lloyds TSB said: "It is a business decision. Most of them have moved directly in line with the change. We believe that our accounts remain broadly competitive."

However, if you kept £2,500 in this account for one year and were a higher-rate tax payer, you would be losing money in real terms.

After tax at 20% and inflation of 2.6% is included, you would be left with £2,467 - a loss of £33.

NatWest has also made a large number of cuts to savings rates, including a 75 basis-point cut off its one year Community Bond.

Within guidelines

A number of smaller lenders, such as Portman, Nottingham, Staffordshire and Furness have decided to wait until the next MPC meeting for a decision.

Lenders that have made the full quarter-point cut include HSBC, Bradford & Bingley, Britannia, Cheshire, Principality, Halifax and Nationwide.