Lenders follow base rate cut

Several lenders have announced they will cut their own interest rates in response to the Bank of England's decision to drop the base rate to three per cent.

Despite fears lenders would ignore any changes in the base rate due to the consistently high Libor rate – the actual rate at which banks lend to each other – several have already promised reductions.

Lloyds TSB and Cheltenham & Gloucester (C&G) was the first to confirm it would pass the base rate cut in full to its standard variable mortgage rate (SVMR).

The lender made the promise shortly before the Bank of England announcement was made and have not gone back on the pledge, despite the bigger-than-expected reduction.

Customers who have a mortgage with C&G will see their SVMR fall from the current 6.5 per cent to five per cent from December 1st.

However, there have been no announcements yet from the two other banks that have accepted government cash to shore up their balance sheets.

Royal Bank of Scotland and HBOS both said their rates were "under review".

HSBC, which had this week signaled it may not be prepared to pass on any base rate cut, said the "vast majority" of its mortgage customers would benefit from the reduction.

The bank said it is reviewing its standard variable rate in the light of the decision, but many customers will see their rate fall in line with the Bank cut. All savings rates will also be reviewed, HSBC added.

Yorkshire Building Society said: "Our own savings and mortgage rates are not directly linked to base rates, and we have to carefully consider the interests of both investing and borrowing members in any forthcoming rate change decision."

Alliance & Leicester said it is cutting all of its fixed rates deals for customers seeking up to 75 per cent loan-to-value.

Two and five year fixed rates are cut by 0.20 per cent and three-year fixed rate deals are now 0.15 per cent lower, as of today.