Nationalised Rock defies Number 10 call to help
Dec 9 2008 by William Green, The Journal
NORTHERN Rock last night failed fully to pass on last week’s interest rate cut as Downing Street again urged banks to help struggling customers and businesses.
The nationalised bank said it was cutting its standard variable rate (SVR) mortgage by 0.5% to 5.34% after the 1% fall in the Bank of England base rate.
But it stressed that most Rock customers were on fixed rate deals, so would be unaffected, with only a very small number on SVR mortgages. Current tracker mortgage customers benefit from the full 1% reduction.
The North East lender also said it was cutting savings rates by up to 1.5%, after leaving them unchanged for many customers following November’s interest rate cut.
Lloyds TSB, HSBC and Barclays’ lending arm the Woolwich are the only major lenders so far to say they will reduce their SVR by the full 1%, although the Woolwich did not pass on any of November’s 1.5% cut. Halifax is reducing its SVR by 0.25%, while Nationwide is passing on 0.69% of the cut and Royal Bank of Scotland and Bradford & Bingley are both cutting their rates by 0.75%.
But lenders have warned their own funding costs remain high, with the inter-bank lending rate falling only slightly despite last week’s Bank of England cut. A Northern Rock spokeswoman said: “We have to look at the needs of both our borrowers and savers – we want to pass something on to our borrowers, but we have to be mindful of our savers as well. Last time there was a Bank of England announcement we did pass on the full 1.5% reduction.
“But we are currently under temporary ownership and we are looking to repay the Government loan. In order to do that we need to shrink our mortgage book.”
The developments came after Downing Street again urged banks to help customers after The Journal highlighted the case of a North East businessman offered a loan with an interest rate of nearly 21% to expand his business.
Experienced businessman Raymond Carr was shocked when he was quoted 20.99% by Barclays after seeking funding to open a Gateshead store.
The bank said it could not comment on individual cases, but would welcome another meeting with Mr Carr, when it might be able to offer a lower rate.
Asked about the case, the Prime Minister’s official spokesman said: “We want to ensure that small businesses get a fair hearing from banks and that is why we have been talking to the banks.
“And that’s why issues such as those you have raised will be the sorts of issues that [Business Secretary] Lord Mandelson and the Chancellor will continue to raise with the banks.”
He said: “We are seeing some progress, but clearly there is more to do.” In another development, Lloyds TSB increased the margins on its tracker mortgages by up to 0.4% as it relaunched the deals after withdrawing them before last week’s rate cut.
It justified the decision by saying the key inter-bank lending rate, the three-month Libor, had fallen by only 0.4%, despite the 1% fall in official interest rates to just 2%.
It said the margin it charged above base rate had increased, but the actual pay rate for customers on the deals was now up to 0.7% lower.
A two-year tracker mortgage now starts at 3.69% for people with a 25% deposit who pay a 2.5% arrangement fee.
Borrowers with a 25% deposit who opt to pay only a £995 arrangement fee will have a rate of 2.49% above the base rate, giving a current rate of 4.49%.
Nationwide also announced it was withdrawing its tracker range for repricing and would relaunch the mortgages next week.
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