Halifax dilutes rate cut effect

Britain's biggest mortgage lender, Halifax, yesterday came under fire after deciding to pass on only part of last week's surprise interest rate cut to its borrowers.

About a million homeowners with the Halifax will see their monthly mortgage bills fall only slightly after the lender cut its standard variable rate by 0.15 of a percentage point rather than the quarter-point announced by the Bank of England.

Criticism of Halifax's move came after other lenders, including Cheltenham & Gloucester and Woolwich, passed on the base rate cut in full immediately after the Bank's announcement.

Abbey National, Halifax's closest competitor, reduced its standard variable rate yesterday to 5.54%. Nationwide, whose standard rate is 4.64%, said it was monitoring the market.

Halifax was criticised the last time base rates were cut by a quarter-point, in February, when it reduced its standard rate by a tenth of a point.

The latest cut - from 5.65% to 5.5% - which comes into effect in August, means a borrower with a £100,000 mortgage will see a saving of £9 a month.

While Halifax claimed yesterday that its new home loan rate was one of the lowest on the high street, many homeowners are likely to feel short-changed, according to mortgage experts.

David Hollingworth of mortgage brokers London and Country said: "Halifax will say its rate is still lower than some of its competitors, but its of little comfort to Halifax borrowers if they are not having the rate passed on in full.

"But even if they had passed on the full quarter per cent cut, there are still better deals for borrowers elsewhere in the market. Halifax's standard 5.5% is still well above some other rates."

Simon Jones of mortgage broker Savills Private Finance said he was disappointed that the rate cut had not been passed on in full.

He added that customers on tracker mortgages, which shadow the ups and downs of the base rate and are popular with Halifax customers, would see a quarter-point cut.

Halifax has 2.5m borrowers but does not disclose the proportion who have loans at the standard rate or other types of product.

A spokesman for Halifax said: "There's been an element of catch-up from our competitors. Abbey has been out of tune for a while. We are still lower than many."