Nationwide Building Society will not pass on any further interest rate cuts to the majority of its tracker mortgage customers.
The lender plans to use a clause in customers’ mortgage contracts to allow it to stop reducing loan rates in line with cuts to the Bank of England base rate once official interest rates fall below 2%.
Refusal to cut mortgage rates designed to ‘protect savers’
A Nationwide spokeswoman said today that the move, which will affect more than 250,000 customers, was to protect its savers from further aggressive rate cuts.
She commented, ‘Savings rates are at an historic low and this move means we will not be forced into a position where we could have to cut savings rates more aggressively than we would otherwise like to.’
The group slashed its savings rates by up to 1.1% following December’s base rate reduction, with returns on savings accounts cut by an average of 0.87%, and it is offering no guarantee that rates will not be reduced further going forward.
‘Collar’ on rates affects most tracker mortgage customers
The so-called collar on the majority of the group’s mortgages was supposed to kick in when the base rate fell below 2.75%. But Nationwide decided to waive the clause last month, passing on December’s 1% reduction in full.
Nationwide‘s decision will only affect tracker customers with a 2.75% collar – customers who took out one of these mortgages since November have a lower floor of 1%.
Mortgage customers on standard variable rate will benefit from future rate cuts
Nationwide said it would stand by its pledge that its standard variable mortgage rate (SVR) would never be more than 2% above the base rate.
Its SVR currently stands at just 4%, meaning that the group will have to pass on any further interest rate cuts to customers on the deal in full.
© Press Association 2009
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