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Banks defy pressure on passing on rate cut

Many banks have defied the Government and only passed on a part of the Bank of England’s latest 1 per cent rate cut to their standard variable-rate mortgages.

The BoE reduced rates to 2 per cent last week and ministers immediately called for the full cut to be passed on.

Lloyds TSB and Abbey agreed to the full cut but nationalised Northern Rock cut its SVR by only 0.5 per cent and part-nationalised HBOS by 0.25 per cent.

RBS cut its standard variable rate by 0.75 per cent, Nationwide by 0.69 per cent and Woolwich by 1.15 per cent although it did not pass on November’s 1.5 per cent cut.

HBOS and Nationwide both scrapped their controversial tracker collars of 3 per cent and 2.75 per cent respectively. Mform.co.uk calculates that the move could cost Halifax £575m a year.

Most tracker products were withdrawn after the bank rate cut with Lloyds TSB offering a new tracker from 3.69 per cent at 60 per cent LTV and Abbey from 4.29 per cent at 60 per cent LTV.

Capital Fortune managing director Rob Kileen says: “The latest trackers and fixed rates might look good but the savvy borrower knows they are still well above base rate.

“With low SVRs, the incentive margins to move from them are too close to broker right now.”

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