Cuts only for some as standard falls

It was bound to end in tears. The mortgage price war trumpeted by lenders a few weeks ago is already producing casualties.

Some borrowers are realising that there were some big catches in the price cuts announced first by Nationwide, then Halifax and Abbey. Halifax has come in for particular criticism, reflected in our consumer rights column Money Writes (see page 26).

The problem is that the lenders have cut their 'standard' mortgage rates, but not for all borrowers. Those with discounts and capped rates still have their rates set against higher rates.

At Nationwide and Abbey the old rate may apply for a time even after the discount has expired. Halifax will let people with extended lock-in clauses bump down to the lower rate, although unlike Nationwide, but in common with Abbey, those who do qualify for the cheaper rate must apply and fill out forms to pay less.

Confused? Apologies, but Cash and other personal finance media have done their best to explain how all these changes work. Borrowers are still struggling, and the Financial Ombudsman has had a number of calls from unhappy customers who may lodge formal complaints.

Each lender has a fulsome explanation, but the root of the confusion lies, of course, somewhere near the bottom line on their accounts.

Nationwide, still a mutual, has been running a lower standard rate even before the latest change, and automatically switching across its existing standard rate customers.

But standard rate loans have been far too high for years, compared with special deals, and the fair thing would have been to reduce them gradually and cut back on discounting. But the shareholder-owned lenders, in particular, feared the effect of such a move on profits and share prices.

Admittedly many of the borrowers now confused by their lenders' new deals will have done nicely out of their discounts, even if these are pegged to now inflated rates. But the complexity of the new deals should remind borrowers to be wary.

The original aim of the mortgage cuts was to pacify an increasingly restless population of borrowers. But the confusion of the latest moves may irritate as many as it pacifies.

Borrowers should remain as restless as ever.