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Which banks have passed on the base rate cut and which haven't?

Heroes

HBOS, owner of Halifax, the UK's biggest lender

Market share: 20.1%; Gross mortgage lending in 2007: £73.1bn

HBOS bowed to immense pressure and passed on Thursday's 1.5 per cent cut to its SVR across all four of its mortgage brands — Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance. It was also one of the first to pass on last month's half-point cut in full to borrowers on a variable rate. HBOS is one of the three banks accepting taxpayers cash as part of the Government's £37 billion bail-out of the banking industry.

Lloyds TSB, owner of Chelthenham & Gloucester and Scottish Widows

Market share: 8.1%; Gross mortgage lending in 2007: £29.5bn

The first to pass on Thursday's 1.5 per cent, Lloyds TSB is reducing its standard variable rate (SVR) by the full amount to 5 per cent from December 1. The move will reduce monthly repayments by £187 on a £150,000 interest-only mortgage. Scottish Widows, the mortgage lender which is part of the Lloyds TSB group, also said it was reducing its SVR today by 1.5 percentage points to 4.99 per cent.

Abbey

Market share: 9.8%; Gross mortgage lending in 2007: £35.6bn

The bank, which is owned by Spain's Santander and is the UK's second biggest lender, was the second to cut its SVR on Thursday by the full 1.5 per cent, reducing it from 6.94 per cent to 5.44 per cent from December 1.

Bradford & Bingley

Market share: 3.9%; Gross mortgage lending in 2007: £14bn

The nationalised lender cut its product variable rate (PVR) by 1.5 per cent on Friday morning. However, as its PVR is pegged to the base rate, Bradford & Bingley had no choice but to pass it on to borrowers. Around 15 per cent of Bradford & Bingley's mortgages are on the PVR. The lender also passed the full 1.5 per cent cut to a small number of borrowers on its standard variable rate .

Nationwide

Market share: 9.3%; Gross mortgage lending in 2007: £33.9bn

Britain's biggest building society and third biggest lender was the first to cut its base rate by the full amount following a meeting with the Chancellor attended by Nationwide and the major high street banks on Friday morning. Its SVR will fall from from 6.19% to 4.69% to December 1.

Royal Bank of Scotland (RBS) and its sister NatWest

Market share: 6.2%; Gross mortgage lending in 2007: £22.6bn

RBS announced it was cutting the SVR by the full 1.5 percentage points from December 1. RBS was under particular pressure to cut its rates as it is set to take the biggest share of taxpayers cash in the Government's £37 billion bail out of the UK's banking industry. It's SVR has fallen from 6.69 per cent to 5.19 per cent.

Read the full article at Times online

Labels: credit crunch, HBOS, HSBC, LLoyds, RBS, UK Interest rates

Interest rates in Britain will drop to a new 50-year low in the coming months, economists say, as the Bank of England tries to head off a serious recession. The Bank’s monetary policy committee (MPC) is expected to start the process by cutting rates this week.

The predictions came as Gordon Brown, meeting European leaders in Paris, called for a new £12 billion fund to help small businesses through the crisis. The fund, an early drawing-down of the existing European Investment Bank budget, would “show how we can do more in Britain and across Europe to help small businesses, as well as households, through what is a difficult economic time,” he said.

Lady Vadera, the minister and former Brown adviser, is set to take on a more prominent small-business role under the new business secretary, Peter Mandelson.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, said at the same meeting Europe had to do more to coordinate its response. “What counts above all is coordination and the will not to act each for himself,” he said. “The world economic situation is very worrying,” he added.

Read more at Times Online

Labels: Bank of England, UK Interest rates

Banks are taking a tougher line with commercial property investors and could foreclose on underperforming loans in the sector in the next few months, according to research from Drivers Jonas, the surveying firm.

Property investors that are unable to bring new equity into their investments, to bring loan-to-value ratios back into line, may find themselves in difficulties, the research suggests.

"There seems an inevitability that situations which are deemed to be "underwater" for the long-term could end up with lenders foreclosing," Drivers Jonas says in its summer investment trends report.

"It remains the case that, if possible, banks are using LTV (loan-to-value) breaches to renegotiate loan terms but they will not hesitate to act if they feel that the loan is under threat," the report continues.

It says that banks will become more vocal in the next few months as the risk of tenants failing to pay their rents rises, along with the continuing pressure of capital write-downs across the banking sector.

Read more at Times Online

Labels: commercial mortgages, property prices, UK Interest rates

Plenty has happened since the Bank of England last cut interest rates in April. Inflation has risen to 3.8% - almost double the government's 2% target - requiring the Bank's governor, Mervyn King, to write an explanatory letter to chancellor Alistair Darling. At the same time, the economy has weakened rapidly – today's news from the Halifax of an 11% drop in house prices over the past year is merely the latest evidence of a deflating property bubble.

Official figures suggest Britain continued to expand - if weakly - in the second quarter of the year, but all the signs are that the second half of the year will see the economy slide into its first recession in more than a decade and a half.

Against that backdrop, it was hardly surprising that the Bank's monetary policy committee left interest rates on hold today.

Article continues at Guardian news

Labels: Alistair Darling, Bank of England, chancellor, Halifax, Mervyn King, UK Interest rates, UK recession

The Bank of England held interest rates steady at 5% yesterday as it decided inflationary risks were too great to allow it to cut borrowing costs to boost the flagging economy.

The monetary policy committee's decision followed a flurry of gloomy data about the state of the economy in the UK and beyond, and appeared to be backed by a senior figure at the International Monetary Fund, who suggested global inflation is back and policymakers should act aggressively if things start to get out of hand.

John Lipsky, the IMF's deputy managing director, said in New York: "Signs of more general inflation pressures would justify a decisive policy response, lest the impressive gains in global stability attained in recent years be sacrificed."

There had been calls for the Bank to match last month's quarter-point cut and bring some relief to the struggling property market. Nicholas Leeming, of propertyfinder.com, was unhappy at the lack of action: "The Bank can't afford to wait another month before it acts again. Mortgage lenders have all but withdrawn from the market, leaving many homebuyers unable to qualify for financing and many unable to get it at a price they can afford.

"The housing market has come to a standstill but there's no shortage of buyers, just a shortage of mortgages, which is now impacting the wider economy. Inflation remains a threat, but further immediate intervention, as well as future rate cuts, is now essential to stimulate lending, the housing market and the economy."

The decision had been widely expected in the City, though some economists had expected the MPC to cut rates after a run of weak data from the dominant services sector, the manufacturing sector, the housing market and the retail sector.

David Kern, economic adviser to the British Chambers of Commerce, said he was disappointed the MPC had not cut rates. "We believe this decision was a mistake given the serious threats to economic growth. The MPC has missed a valuable opportunity to underpin business and consumer confidence and to limit the potential damage to the economy."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that slowing economic activity was the most pressing issue for the authorities. "Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure."

With mortgage approvals down nearly to half what they were a year ago and housebuilders' reservations having tumbled by two-thirds, economists are concerned that falling house prices and tumbling consumer confidence could lead to a slump in consumer spending, which accounts for two thirds of the economy.

Latest estimates suggest the economy has slowed to well below its long-term average growth rate and is likely to slow further. However, the MPC is conscious that inflation is above its 2% target and likely to rise in the coming months.

Lipsky said inflation concerns have resurfaced even as global growth slows. "The effects of the slowdown are being felt most keenly in the US, but growth in all regions of the world is slowing," he said.

The IMF remains optimistic that the world will not experience a return to a 1970s-style inflation spiral, although the risk of such an outcome could not be dismissed, Lipsky added.

Oil prices hit a fresh high of $123.93 on Wednesday and the AA is releasing figures today showing the cost of motoring has risen 11.5% over the past year.

The government will announce measures today to help homeowners facing difficulties with repaying their mortgages.

The European Central Bank left eurozone interest rates at 4%. The ECB faces higher inflation than in Britain so is even more reluctant to cut borrowing costs.

Full story posted here.

Labels: Bank of England, ECB, Housing market, IMF, MPC, property prices, RICS, UK Interest rates

UK interest rates have been held at 5% as the Bank of England decided to focus on inflation risks, despite signs that the economy is slowing.

The rate freeze had been expected, although many analysts now predict that rates will be cut to 4.75% in June.

The decision came despite a flurry of downbeat data which added to worries about the state of the UK economy.

However, rising fuel and food prices means that inflation is ahead of the government's target.

'Recession risk'

"The latest data shows the economy is slowing, albeit only gradually, and at the same time inflationary pressures continue to mount," said Ian McCafferty, chief economic adviser to the CBI business group.

"The Bank faced a difficult decision, but it is no surprise that rates were kept on hold this month."

Meanwhile the body representing Britain's manufacturers, the EEF, said that the decision to hold rates was only delaying the inevitable cuts.

"The economy has been through a series of shocks since the credit crisis hit last summer and the Bank has been right so far in responding with a measured approach on rates," said the EEF's chief economist, Steve Radley.

The moment the rates decision was announced

"However, despite concerns on inflation, further cuts to interest rates are needed to prevent the economy from drifting towards recession."

The British Chambers of Commerce (BCC) argued that a rate cut would have underpinned business and consumer confidence and helped limit the potential damage to the economy.

"This decision was a mistake given the serious threats to economic growth," said BCC adviser David Kern.

Roger Bootle, economic adviser to Deloitte, said that by leaving the rate on hold, the Bank's Monetary Policy Committee (MPC) risked "presiding over the deepest and longest economic downturn since the recession of the early 1990s".

Mr Bootle predicted that rates would fall to 3.5%, or possibly lower, but that the moves would be "too late to prevent the economy from flirting with recession".

Speculation

Homeowners had been hoping for rate cut which - if it had been passed on by lenders - might have seen some people's mortgage payments reduced.

However, the credit crisis has made funding mortgages trickier for banks, and when interest rates were cut to 5% from 5.25% last month, not all lenders passed on the full reduction to borrowers, despite government pleas.

Negative manufacturing and service sector data released this week had led some to speculate that the Bank might decide to cut rates this month.

Office for National Statistics data showed that manufacturing output fell by 0.5% in March, the sharpest rate of decline in six months.

The figures followed data released earlier this week by the Chartered Institute for Purchasing and Supply which suggested that the UK services sector grew at its slowest rate in nearly five years in April.

The most recent available data showed that Consumer Prices Index inflation was 2.5% in March, holding steady from February, but well ahead of the government's 2% target.

On Wednesday, the British Retail Consortium said food prices in April were up 4.7% compared with a year ago, although falling prices of non-food items meant that shop prices overall were up by 1.2%.


Original article at BBC Business news.

Labels: credit crunch, Deloitte, UK Interest rates