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07 Feb, 2008

Published: 14:23 Thursday 07 February 2008
By: David Campbell, Investment Reporter

Nationwide and Woolwich have said they will pass on today's 0.25% Bank of England base rate cut to mortgage borrowers, although other lenders remained noticeably silent.

Woolwich said it would pass on the change to customers currently paying its standard variable rate from 1 March, while those on base rate trackers would change immediately.

'The base rate cut is a welcome move as the housing market is slowing considerably and mortgage affordability is stretched at the moment,' said Andy Grey, head of mortgages at Woolwich.

Nationwide said that it would knock 0.25% from payments on its Base Mortgage Rate, which is guaranteed to remain within 2% of the BoE rate from 1 March, bringing it to 6.74%.

'This is good news for the quarter of UK borrowers on tracker rates who will see an imminent reduction in rates,' said Michael Coogan, director general of the Council of Mortgage Lenders.

'However, borrowers should not expect that a base rate reduction will automatically result in a cut in standard variable rates or discounted rates across the market.

'Lenders' rate setting policies are more complex than simply the level of the base rate. They are determined by a range of factors including the cost of retail funding and the cost and availability of wholesale funding.'

Both Nationwide and Woolwich are able to draw on extensive consumer deposit bases to finance their mortgage lending. Lenders reliant on money markets for funding will not necessarily be able to reflect the base rate change.

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