Rate cut to be passed on to savers

By Lorraine Turner

LONDON (Reuters) - HBOS, Lloyds TSB and Barclays will pass on to borrowers the full benefits of a surprise half a percentage point cut in interest rates by the Bank of England.

Both HBOS's Halifax and Lloyds TSB, among the beneficiaries of a multi-billion pound rescue package announced by the government on Wednesday, said they will reduce standard variable rates on mortgage products to 6.50 percent from Nov 1.

Abbey, HSBC, Royal Bank of Scotland and Alliance and Leicester said their mortgage rates were under review following a cut in interest rates to 4.5 percent from 5 percent that was co-ordinated with other central banks.

The rate change, which had not been expected until Thursday at the earliest, was widely welcomed by the industry.

"This reduction in bank rate will provide some support to the housing market because it will help those borrowers on variable rates," said Adrian Coles, Director General of the Building Societies Association.

"However new fixed rate deals and those linked to money market rates will not necessarily fall because they are determined in the money markets rather than directly by the bank rate," he said.

The top building societies, Nationwide and Britannia, said they will assess the reaction from money markets, currently paralysed by the global financial crisis, before altering mortgage rates.

Financial institutions may announce new rate changes as soon as midday on Thursday, said Darren Cook, analyst at Moneyfacts.co.uk.