Page last updated at 15:06 GMT, Wednesday, 3 December 2008

Lloyds to pass on any rate change

Lloyds TSB sign
Another 1% rate cut would save 85 on a 150,000 repayment mortgage

Lloyds TSB will pass on any cut in interest rates by the Bank of England this week to all existing customers with variable and tracker mortgages.

Its tracker rates fall automatically, while the bank pledged in 2002 that its variable rates would never be more than two percentage points above bank rate.

The Bank of England is widely expected to cut its bank rate again on Thursday.

The reduction could be from 3% to as low as 2%, which would take bank rate to its lowest point since 1951.

Lloyds TSB, currently one of the biggest active mortgage lenders, will pass on any cut in bank rate on 1 January 2009.

It will also pass on, to some extent, any cut to new borrowers who take out fixed or tracker-rate deals.

"Whatever the size of the cut, if base rate comes down tomorrow, we'll pass the full benefit on to our existing customers," said Stephen Noakes of the Cheltenham & Gloucester, the main mortgage lending arm of Lloyds TSB.

"As soon as we know the impact of the base rate decision on wholesale funding costs, we will launch our new fixed and tracker rates.

"If we can make a saving on funding new mortgage products, we will look to pass this on," he said.

The bank will withdraw temporarily all its current tracker deals for new borrowers at the end of business on Wednesday.

When bank rate was unexpectedly lowered from 4.5% to 3% last month lenders came under intense pressure from the government to immediately pass it on to their borrowers, especially those on standard variable rates.

However the head of the Council of Mortgage Lenders, Michael Coogan, said yesterday it was "both short-sighted and counter productive" for the government to ask for lenders to do this.

"Although a small percentage of borrowers - around 10% - may have a short-term financial benefit, this disregards the larger number of savers on fixed incomes dependent on their investment returns - the elderly and charities being two major examples of disadvantaged groups when rates fall," he said.


Lender SVR before BoE decision SVR after BoE decision Rate change (percentage points)
HBOS 6.50% 5.00% -1.5
Nationwide BS 6.19% 4.69% -1.5
Abbey 6.94% 5.44% -1.5
Lloyds TSB/ C&G 6.50% 5.00% -1.5
Northern Rock 7.34% 5.84% -1.5
Barclays 6.64% Under review
RBS 6.69% 5.19% -1.5
HSBC 6.25% 5.44% (5 Dec) -0.81
Alliance & Leicester 6.94% 5.84% -1.1
Bradford & Bingley 7.09% 5.59% (7 Dec) -1.5
Bristol & West 6.59% 5.49% -1.1
Britannia BS 6.30% 5.30% -1
Yorkshire BS 6.60% 5.60% -1
GE Money 10.39% 8.44% -1.95
Coventry BS 6.84% 5.34% -1.5
Standard Life 6.59% Under review
Clydesdale & Yorkshire 6.64% 5.14% -1.5
Chelsea BS 6.94% 5.79% (31 Dec) -1.15
Skipton 6.45% 5.95% -0.5
SVR: Standard Variable Rate. All changes on 1 December unless stated.

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