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Last Updated: Thursday, 6 December 2007, 15:58 GMT
Mortgage firms react to rate cut
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A number of other lenders have their rates "under review"
Leading mortgage lenders have responded to the Bank of England's interest rate cut, fully passing it on borrowers.

Halifax and Nationwide were the first to reduce their standard rates after the Bank reduced the UK base rate from 5.75% to 5.5%.

Passing on the cut in full will knock between 15 and 20 off the monthly repayments on a 100,000 mortgage.

Industry analysts had predicted that some lenders would pass on only part of the rate cut, or none at all.

The Bank of England's Monetary Policy Committee had been under pressure to reduce rates after a series of surveys indicated that economic conditions had deteriorated over the past few weeks.

Swift reaction

Halifax was the first lender to respond - passing on the full cut to borrowers, reducing its standard variable rate (SVR) from 7.75% to 7.50%.

Nationwide swiftly followed suit, cutting its equivalent - the base mortgage rate (BMR) - from 7.24% to 6.99%.

A reduction in interest rates is exactly what the market needs and will benefit consumers
Michael Coogan, CML
The lower rates will be available to new customers from today.

In both cases the decrease will come into effect for existing borrowers on 1 January.

The speed of the response from the UK's two largest lenders puts pressure on others to follow suit.

First Direct later said it would also pass on the full interest rate cut to borrowers, but with immediate effect for new and existing customers. Its SVR fell by 0.25% to 6.5%.

Other banks have yet to announce their response, saying only that their mortgage rates were currently "under review."

Customers on tracker mortgages will see their payments fall automatically, but the millions of homeowners who have fixed rate deals will see no change.

Lack of capacity

The Council for Mortgage Lenders (CML) had called on the Bank to cut rates to help address the funding pressures which "started to crystallise" for its members.

"A reduction in interest rates is exactly what the market needs and will benefit consumers," said CML director general Michael Coogan.

"This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year," he added.

However, he called on the authorities to "intervene more aggressively" to boost the wholesale markets further.

"There is a real need to minimise the shortfall between the demand for mortgages and lenders' capacity to supply them."

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