Rock yet to pass on interest rate cuts
Apr 15 2008 by Andrew Mernin, The Journal
NATIONALISED Northern Rock has yet to pass on last week’s interest rate cut to borrowers, despite calls from the Government for lenders to reduce their rates.
The Newcastle group said yesterday that its standard variable rate (SVR) “remained under review” following Thursday’s quarter-point reduction by the Bank of England’s Monetary Policy Committee. The troubled lender, which was nationalised after running into problems as a result of the credit crunch, passed on only 0.1% of February’s rate cut and 0.15% of December’s.
The group said none of its new products were linked to its standard variable rate, adding that if it did decide to make a change, it would not come into force for existing borrowers until the first of the month, regardless of when it made the announcement.
Northern Rock’s admission that it had not yet reduced its SVR came the day after Prime Minister Gordon Brown called on banks and building societies to pass on recent interest rate cuts to borrowers to help the mortgage market.
The PM is also due to meet representatives from the major banks today to discuss the current situation. So far only a handful of lenders have said they will reduce their standard variable rate, including Halifax, Nationwide, Lloyds TSB’s lending arm Cheltenham & Gloucester and the Woolwich, which is part of Barclays.
Abbey, which has not yet said if it will be reducing its SVR, is expected to announce today that it will not be passing on the full rate cut to all of its new tracker customers. Around a fifth of lenders either failed to cut their rates following the two previous base rate reductions, or they did not pass on the full 0.25% cut.
But even if banks do heed Mr Brown’s calls to pass on rate cuts, it is doubtful the move will do much to ease the problems the mortgage market is currently facing.
Sue Anderson, for the Council of Mortgage Lenders, said: “The number of people affected by variable rates will be a minority. The real issue is new product pricing.”
Probe urged
A MAJOR Northern Rock shareholder has demanded an investigation into how the BBC found out about emergency loans given to the troubled lender by the Bank of England.
Hedge fund SRM Global, which was the biggest shareholder in Northern Rock before it was nationalised, wants to know the source of the news which caused panic among customers and led to a run on the bank.
Robin Ashby, of the Northern Rock Small Shareholders’ Association, claimed the information leak was politically motivated. He said: "It was part of the Government’s macho stance and its naming and shaming policy which ended up with a major run on the bank."
