Nationwide Building Society’s rate cuts of 0.2% to 7.09% will not spark a price war, according to rival lenders.
Nationwide said the rate reduction is down to a predicted fall in interest rates and not due to a decline in new lending. Peter Brown, press officer at Nationwide, said: “If you look at our track record, lending has been running way ahead of what would be described as our natural market share.
“We have had a period of considerable interest rate stability and the decision to cut our standard variable rate mortgage was in response to what we anticipate will happen in the market – a downward move for interest rates.”
Responding to the news, competitors denied plans to follow Nationwide’s lead.
Andrew Homer, press manager at Alliance and Leicester said: “Although we regularly review rates, we are not planning to move our standard variable rate mortgage.”
Halifax gave a similar response, adding that standard variable rate mortgages were not popular with new customers and more existing customers were switching to tracker products.
Celia Rowland, senior press officer at Halifax, said: “We have no plans to follow suit – last year, fewer than 1% of our customers went for standard variable rate mortgages.
“At the Halifax we write an annual letter to our 2.5 million mortgage customers offering a review of their mortgage and the opportunity to transfer from variable rate mortgages. We have found that more customers, both new and existing, are opting for more flexible tracker products. Instead of making cuts, we are looking at mortgages as a whole to try and match the best product with each customer.”
Nationwide’s specialist arm UCB Home Loans has also made a 0.2% cut this month – on all fixed rate mortgages.
UCB’s two-year fix has fallen from 6.25% to 6.05%, the five-year fix from 7.75% to 7.55% and it is also launching a three-year fixed rate at 6.9%.
Commenting on the move, Charles Reed, managing director of UCB, said: “We are trying to retain a comprehensive and competitive range of products. Due to the current market, the opportunity came to sharpen up our pricing. As for what our competitors will do, we will have to wait and see.”
The Mortgage Business said it had no plans to follow suit. Bill Dudgeon, managing director of The Mortgage Business, said: “It is part of our strategy to remain competitive, but we have no plans to change rates at the moment. As far as we are concerned, UCB’s move will not cause a price war.”
The recent cuts may not spark a price war, but lenders seem to agree that the new year will undoubtedly see a fall in interest rates. Rowland said: “We believe rates have peaked and by the end of 2001 will be down to around 5.75%”. Homer added: “We expect to see a small increase in interest rates at the beginning of 2001, but predict a decline by the end of the year.”