Banks react to interest rate cut

The credit crunch has made mortgages much harder to come by.

Some of the UK's major lenders have made an immediate decision to pass on the Bank rate cut to customers with a standard variable-rate mortgage (SVR).

Halifax, Nationwide, and Woolwich are among those to have announced they will be passing on the half a percentage point cut in full.

Any changes to SVRs would tend to come into force on 1 March.

The majority of customers with lenders who have deals that track the Bank rate will benefit from the drop.

Lloyds TSB, Cheltenham and Gloucester and the Skipton Building Society also said they would pass on the rate cut.

However less than 8% of the UK's 11.7 million mortgage holders are on an SVR.

About 40% are on tracker or discount mortgages while more than 51% are on fixed rate deals, according to the Council of Mortgage Lenders (CML).

Crisis

The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the shrinking economy.

This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending.

The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction.

But some business groups argue rate cuts will not ease the economic crisis.

HOW MORTGAGE LENDERS RESPONDED

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