One of Northern Ireland’s biggest banks last night decided to pass on the Bank of England’s latest interest rate to its standard variable rate customers — but not by the full 1%.
Ulster Bank followed the lead set by Bank of Ireland when it announced yesterday it had decided to reduce its Standard Variable Rate (SVR) mortgage rates.
All of Northern Ireland’s ‘big four’ banks agreed to pass the full 1% cut on to their tracker mortgage customers immediately after the Bank of England cut the base interest rate by 1% to stand at 2% on Thursday, a level not seen since 1951.
Bank of Ireland immediately agreed to also ease pressure on its SVR customers — leaving Ulster Bank, First Trust and Northern Bank reviewing whether they would follow suit.
Unlike trackers, SVR lending is not automatically tied to interest rate cuts.
As Prime Minister Gordon Brown and his Chancellor Alistair Darling yesterday urged banks to share the cut in in full, Ulster Bank announced it would reduce its SVR by 0.75%, from 5.42% to 4.67%.
“This move reflects the increased cost of money being experienced throughout the banking sector. All rates will be effective by January 1st 2009,” it said in a statement.
Six of the top 10 lenders have now said they will be passing on at least some of the cut
“All customers affected will be made aware of the change and its impact on their monthly payments.”
The bank highlighted that it also needs to assess the impact of a rates cut on its savers as well as borrowers.
Both Ulster Bank tracker and SVR mortgage customers benefited from the 1.5% cut last month and a 0.5% cut in October. First Trust and Northern Bank are both still reviewing whether to include SVR customers in the rates cut.
Six of the top 10 lenders have now said they will be passing on at least some of the reduction to their SVR customers.
HSBC, Lloyds TSB, and Barclays' lending arm the Woolwich all said they would be reducing their SVR by at least the full 1%, while Nationwide is passing on 0.69% of the cut and Britain's biggest mortgage lender Halifax is shaving 0.25% off its SVR.
The announcements came as the Government continued to put pressure on the banks to pass on yesterday's 1% reduction to homeowners and businesses.
Chancellor Alistair Darling made a fresh appeal to banks to pass on the new rates to help individuals and businesses, urging them to “stick to their side of the deal”.
Shadow chancellor George Osborne said the reluctance of banks to pass on the interest rate cut to customers showed the Government's recapitalisation was not working.