Lender Responds To Base Rate Cut By Withdrawing Tracker Loans

Fri, 10 Oct 2008

Cheltenham and Gloucester (C&G), the mortgage lending arm of Lloyds TSB, has announced the withdrawal of some of its most competitive mortgage deals .

The move follows the emergency cut in the Bank of England’s base rate, to 4.5 per cent, which prompted leading lenders, including Halifax and C&G, to cut their standard variable rates (SVR).

But C&G has now withdrawn a number of home loans that track its SVR and other lenders are expected to follow suit.

The cut in the base rate is expected to only benefit around one-third of the UK’s 11.7 million households with mortgages, as the majority are tied into fixed-rate deals .

Borrowers on existing tracker deals or paying their lenders’ standard variable rates (SVR) should see a reduction in repayments next month, saving around £40 a month on a £150,000 loan .

The swift response from C&G indicates that the impact of the base rate reduction on the overall UK mortgage market could be very limited.

The majority of the UK’s mortgage lenders fund their business by borrowing on the wholesale money markets and the cost of home loans is mainly determined by Libor - the interbank lending rate - rather than the base rate .
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