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The country's biggest lender, Halifax, last night remained unrepentant about not passing on the full one percentage point cut to mortgage rates, despite intense pressure from Gordon Brown. The lender, part of HBOS, is receiving an £11.5bn government bail-out. It is being rescued by Lloyds TSB in which the taxpayer is expected to own around 40% when the controversial deal completes next year.
While Halifax insisted it would only pass on a quarter of the Bank of England's interest rate cut to its standard variable rate customers, there were signs that other lenders were buckling. The prime minister told GMTV: "I think banks should really pass on the interest rate cut. We are talking to the banks."
Royal Bank of Scotland, 58%-owned by the taxpayer, is thought to have been planning to pass on half the rate cut, but yesterday said it would pass on threequarters, taking its standard variable rate to 4.44%. This is still well above the 2% to which the official rate has been reduced. Customers of RBS's tracker mortgage will receive the full cut, as will customers of its One Account.
However, other big lenders, notably state-owned Northern Rock along with Abbey and its subsidiary Alliance & Leicester, were silent about their response to the cut, which has taken rates to their lowest level since 1951.
Lloyds TSB, which is in the throes of taking over HBOS, moved quickly to pass on the full one percentage point reduction to its customers but HBOS insisted it could not pass on the rate cut because of the stubbornly high level of Libor, the rate banks charge each other to borrow money.
The fall in Libor yesterday was only a third of the official rate cut and it is trading at 3.37%. "We have to balance the legitimate needs of our business with those of our customers," HBOS said.
The argument appeared to win support from the Liberal Democrat treasury spokesman, Vince Cable.
"The government should also recognise that some banks are having to borrow money at rates well above the Bank of England base rate. To force these banks to pass on the full rate cut would mean them lending at a loss," Cable said.
Meanwhile it emerged that some asking prices for houses fell by as much as £22,000 in the last week alone as sellers reacted to a host of dreadful economic news. The property website Globrix said yesterday that 3,300 vendors had cut their home's asking price by an average of 7%.
The website also warned that almost of quarter of the unsold housing stock has been on the market for at least six months. Its findings suggest the property market may be in an even worse state than thought. On Thursday Halifax reported that selling prices were now down 16.1% over the past year.
- Mortgage lending figures
- Banks and building societies
- Savings
- Property
- UK banking sector
- HBOS
- Lloyds TSB
- Interest rates
- Interest rates
- Economic policy
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