Despite the BoE’s base rate cut last week to 3%, Lloyds TSB is increasing the margins it charges on tracker mortgages for new customers.

The group, which also lends under the Cheltenham & Gloucester brand, has increased the rate it charges above the Bank of England base rate by between 0.6% and 0.7% on the deals. As a result, new borrowers taking out one of the mortgages will only benefit from between 0.9% and 0.8% of last week’s surprise 1.5% base rate cut.

A dramatic 1.5% cut in the base rate has underlined the level of problems in the property and financial markets. The scale of the Bank of England’s rate cut caught analysts by surprise, with the base rate now falling to 3% - the lowest level since 1955.
Lloyds TSB, its specialist mortgage lending subsidiary Cheltenham & Gloucester and Abbey immediately cut mortgage lending standard variable rates in line with the Bank of England reduction. However, other lenders did not quickly follow suit - arguing that inter-bank lending rates (the Libor) are not falling in line with base rates.
Brokers suggested many mortgage lenders would absorb some of the cut to improve their own lending margins, rather than follow the lead of Lloyds TSB and Abbey. Darren Cook, an analyst at information providers Moneyfacts, said: “Mortgage holders currently paying their lender’s SVR are hoping that their lenders will be as bold, but time will tell. Some lenders have still not passed on the bank’s previous cut of 0.5% and if this is an indication of things to come, a decision to cut rates by 1.5% will indeed cause some healthy debate in bank and building society boardrooms up and down the UK.”

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said: “House prices in the UK fell for the twelfth consecutive month in October. The price of a typical house is now 14.6% lower than at this time last year, the peak of the market. The typical house price fell by 1.4% in October, around the same rate as the average monthly fall of 1.3% over the last year, but lower than the monthly falls recorded in each of the previous three months. The price of a typical house is now £158,872, almost £30,000 less than a year ago, but to put in context, still almost £30,000 more than five years ago.”

The Bank of England cut its key rate to 4.5% - the lowest for two years - while the Fed cut to 1.5% and the European Central Bank (ECB) to 3.75% from 4.75%. China also cut its interest rate by 0.27%.
Many economists now expect the Bank to continue cutting rates to try and prevent the economy suffering a prolonged recession with some penciling in UK rates being cut to as low as 2.5%
The last time the Bank of England cut rates in a special meeting was on 18 September 2001 - when rates came down from 5% to 4.75%.

The South-West of England has become a hotspot for repossessions, with hundreds of people being forced out of their homes and into temporary accommodation, including caravan sites, every month.
Latest figures from the Ministry of Justice reveal that the number of repossession claims issued in Devon and Cornwall were up by 41% this spring compared with the same period last year.

Landlords who need to re-mortgage are running out of options as buy-to-let lenders withdraw products and raise prices in response to Bradford & Bingley’s collapse. The Mortgage Works and UCB - both subsidiaries of Nationwide - temporarily withdrew their buy-to-let deals after Bradford & Bingley (B&B) retracted its entire range, including deals offered through its subsidiary, Mortgage Express (MEX).