Mortgage lenders cut rates but boost margins

Thursday, April 24, 2008

LONDON (Reuters) - Just over a third of mortgage lenders have reduced their rates, a fortnight after the Bank of England's

Quarter-point base rate cut -- most of them passing on the full reduction, although troubled Northern Rock has only handed borrowers a 0.10 percent cut.

A total of 38 banks and building societies -- 38 percent of lenders -- have announced they will cut their standard variable rates (SVRs) following the central bank's move earlier this month, according to data from price comparison.

Most, including the largest four -- Halifax, Abbey, Lloyds TSB and Nationwide -- have passed on the full 0.25 percent cut, but fifth-largest Northern Rock and four others have taken the opportunity to boost margins by reducing their rates by less.

Northern Rock has cut its SVR to 7.49 from 7.59 percent, compared to an average SVR of 7.11 percent.

"It is disappointing to see that almost half of the top 10 lenders have SVR rates above average, with Northern Rock the worst offender ... which ties in with its business strategy," said Denise Harvey, a mortgage analyst at Moneyfacts.

Four smaller building societies have also reduced their rates by less than a quarter percentage point -- by between 0.15 and 0.20 percent.

The moves come amid the continuing fallout from the credit crunch, which toppled Northern Rock, now in public hands, and has seen cash-strapped lenders scrap cheap fixed rates, cut their maximum loan-to-values and tighten lending criteria.

The problems saw the Bank unveil an ambitious plan on Monday to swap banks' risky mortgage assets for at least 50 billion pounds worth of government debt in the latest bid to spare Britain from the ravages of the global credit crunch.

Source

http://uk.news.yahoo.com/rtrs/20080424/
tuk-uk-britain-rates-fa6b408.html