Nationwide not to pass on rate cuts
Updated on 02 January 2009
Nationwide Building Society will not pass on any further interest rate cuts to the majority of its tracker mortgage customers, it said.
The lender plans to invoke a clause in the deals enabling it to stop reducing the loans in line with cuts to the Bank of England base rate once official interest rates fall below 2%.
It said the move, which will affect more than 250,000 customers, was to protect its savers from further aggressive rate cuts.
The so-called collar on the majority of the group's mortgages was supposed to kick in when the base rate fell below 2.75%.
But Nationwide decided to waive the clause last month, passing on December's 1% reduction in full.
A Nationwide spokeswoman said: "Savings rates are at an historic low and this move means we will not be forced into a position where we could have to cut savings rates more aggressively than we would otherwise like to."
The group slashed its savings rates by up to 1.1% following December's base rate reduction, with returns on savings accounts cut by an average of 0.87%, and it is offering no guarantee that rates will not be reduced further going forward.
But the decision to invoke the collar on its tracker mortgages is likely to anger the Treasury, which has called on banks and building societies to pass on base rate reductions to their customers.
A Treasury spokesman said: "The Chancellor has repeatedly made clear that he expects lenders to do their best to help their customers through these difficult times."
The Bank of England's Monetary Policy Committee will hold its next interest rate setting meeting next week, when it is widely expected to slash rates by at least a further 0.5%, with some economists pencilling in a 0.75% cut.
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