Hats off to Lloyds TSB on bold decision

"Congratulations must go out to Lloyds TSB and Cheltenham & Gloucester for making a bold statement earlier today, pledging that they will cut their standard variable rate (SVR) in full in line with the Bank of England rate cut. Hats off to them for not reneging on this pledge after the announcement of the unpredicted 1.50% base rate cut. They will drop their rate to 5.00% with effect from 1 December.

"Mortgage holders currently paying their lender's SVR are hoping that their lenders will be as bold, but time will only tell. Some lenders have still not passed on the bank's previous cut of 0.50% and if this is an indication of things to come, a decision to cut rates by 1.50% will indeed cause some healthy debate in bank and building society boardrooms up and down the UK.

"I am sure that most lenders were bargaining on no more than a 0.50 per cent cut in base rate. More announcements will be on hold to enable additional number crunching to take place to see if they can afford to cut rates. With interbank rate still high, but falling steadily, I will be surprised if many lenders choose to pass on the full benefit.

"Mortgage holders currently on tracker rate mortgages are glad of their choice of product, as they will receive instant benefit. However, they need to check if their lender has a collar rate, which is a bank base rate level below which they will not go below. We know that Nationwide BS' collar is at 2.75 per cent and Skipton BS has now hit its collar rate at 3 per cent. "

Listening to interviews with Alistair Darling yesterday it would appear that Lloyds TSB may have had little choice as he made it quite clear that he wanted banks to pass on the rate cuts, and in their case there probably a few billion reasons why.