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Nationalised bank Northern Rock announced today it was only passing on half of last week's interest rate cut to its variable rate mortgage customers.
The lender is reducing its standard variable rate (SVR) by 0.25% to 5.09% with effect from 1 February; at the same time tracker mortgage customers will see their rates fall by the full 0.5%.
Northern Rock said that in deciding how much of the base rate reduction to pass on it had "given careful consideration to all of its customers". Savings rates at the bank are currently being reviewed.
Last week, RBS and the UK's largest lender, Halifax, also opted to reduce its SVR by just 0.25% rather than passing on the full cut.
Few other lenders have announced a rate change, although borrowers on SVR-linked deals with Nationwide and Skipton building societies, C&G and HSBC have been told their rates will go down in line with last week's cut. Bradford & Bingley, which was also nationalised last year, is yet to announce its plans.
A flurry of new low-cost home loans have been launched in the wake of last week's base rate cut, but first-time buyers and those with small deposits have been left out in the cold.
Despite the Bank of England's half-point cut, which reduced the base rate to 1.5%, millions of borrowers will not benefit from the lower mortgage rates. These include first-time buyers and existing homeowners who no longer qualify for cheap deals but have seen a huge rise in the ratio of the size of their mortgage to the value of their home as a result of falling property prices.
Today, HSBC launched what it said was its lowest ever mortgage rate - a discounted variable deal at 2.99% which will be available from 6 February. However, to qualify borrowers must have a deposit of at least 40% and either earn £75,000 or more or have at least £50,000 saved with the bank.
Barclays has cut its fixed-rate mortgages to 3.79% for borrowers with 60% equity in their homes, while Abbey has also cut rates to below 4%, but borrowers with less than 25% of a property's asking price still face rates of more than 7%.
Abbey's new range of cheaper home loans includes a two-year fixed-rate deal with a rate of 3.99%, available up to 60% loan-to-value (LTV), but there is nothing for anyone with less than 25% to put down. Borrowers with only 5% of a property's purchase price must pay 7.09% for the bank's five-year fixed-rate deal.
For any borrower with a 10% deposit- a sum once accepted by all lenders as a ready key to a decent mortgage - the best two-year fix on offer from HSBC is 6.79%. At Barclays there is no home loan available for anyone with less than a 15% deposit; its best rate for borrowers with an LTV of 85% is 6.79%.
Putting it away
Savers, too, are beginning to feel the pressure. Although the vast majority of institutions have yet to act on last week's interest rate cut, former top-payer Anglo Irish has slashed the rates on its easy access deposit and seven-day notice accounts by 2.1 percentage points to 2.5% and 2.55% respectively.
Leeds building society has repriced its fixed-rate bonds for new customers to take December's rate cut into account - its one-year fixed-rate savings bond now pays 2.5%, down from 3%, and its three-year fixed-rate bond offers 3%, down from 3.5%.
Indian bank ICICI has cut rates on its HiSave account. The interest paid on the account, which has regularly appeared in the best-buy tables, will fall from 4.5% to 3.55%.
Price comparison site Moneyexpert.com said banks and buildings societies had withdrawn almost a quarter of all savings accounts that were on offer this time last year, and slashed average interest rates.
Over the past 12 months, the number of instant access savings accounts has slumped from 1,478 to 1,136.
Sean Gardner, director of MoneyExpert, said: "Banks need a fresh injection of cash, but they need the security of long-term investments to really improve liquidity. So instant access savings accounts aren't a priority at the moment, which explains why a quarter have been withdrawn completely."
While the number has fallen, so has the average rate paid out: on Monday, Bank of England figures showed that weeks before this month's base rate cut banks and building societies were offering the lowest interest rates since records started in 1995.
Official bank data showed that in December average interest rates on instant access accounts, "notice" accounts and short-term savings bonds had all fallen below 1%.
• Is now the time to look again at fixed-rate mortgages? See the Cash section in this Sunday's Observer for the latest opinion
- Mortgages
- Savings
- Interest rates
- Northern Rock
- First-time buyers
- Property
- Banks and building societies
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