LONDON (Reuters) - The country’s second largest mortgage lender said on Tuesday it would pass on last week’s cut in interest rates to borrowers in full.
Abbey said it would cut its standard variable rate (SVR) by 0.25 percent to 7.59 percent from the start of next year.
Many deals, such as discounted loans, are based on lenders’ SVRs, and this is also the rate that a loan reverts too once an initial offer period, such as a fixed rate loan, expires.
A quarter-point cut in average mortgage rates will shave just over 15 pounds off a typical 100,000 pound loan, and almost 39 pounds off a 250,000 pound mortgage, according to data from the Council of Mortgage Lenders.
The Bank of England cut its main rate by a quarter of a percentage point to 5.5 percent on Thursday — the first cut in more than two years.
Halifax, the largest mortgage lenders in Britain with a 20 percent share of the market, and Nationwide, the fourth largest mortgage lender, said they would pass on the full cut minutes after the interest rate announcement.
A handful of other players have since said they would reduce their SVRs.
Egg is so far the only one to not to pass on the full reduction, cutting its rate by just 0.15 percent, while other big players have been slow to announce their intentions.
So far, only eight of Britain’s 120-plus lenders have announced that they will reduce their rates.
Experts expect lenders to be reluctant to pass on rate cuts in full to homeowners as they rebuild battered profit margins, in the wake of the global credit crunch.
Editing by Michael Holden