Mortgage blow for homeowners

BRITAIN'S biggest building society today ruled out further mortgage rate cuts for thousands of struggling homeowners.

Nationwide said it would not pass on any more reductions to about 250,000 families struggling to survive the recession.

Experts said other lenders were likely to follow suit — leaving millions afraid that they will not get the benefit from future rate cuts.

The decision puts Nationwide on course for a confrontation with Chancellor Alistair Darling, who has told banks and building societies they have a duty to help suffering families.

The Treasury made no attempt to hide its fury. A 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 is widely expected to order another half-per-cent cut in loan rates as early as next week, when the Monetary Policy Committee holds the first meeting of 2009.

Customers with tracker mortgages are affected by the Nationwide decision. The building society said it had to keep interest rates for savers at a level high enough to attract savings.

"Savings rates are at a 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," a spokeswoman said.

The Nationwide may be followed by more building societies. Its tracker mortgages contain a clause, known as a "collar", which allows it to refuse to cut its rate in line with the Bank rate once that falls below a certain level. For most tracker customers, the level was set at 2.75 per cent.

The Bank's base rate fell to two per cent last month. Analysts think it will be reduced further this year.

Some 4.2 million borrowers are on tracker deals. Each half-point cut saves someone with a £150,000 mortgage about £50 a month.

Most high-street lenders, including Lloyds TSB, Barclays and Royal Bank of Scotland, do not have collars on their tracker mortgages, which means their customers should get the full benefit of rate cuts.

However, Darren Cook, from website Moneyfacts, said: "Nationwide might be the first but it won't be the only one of the banks and building societies to decide that it can't afford to drop its tracker mortgage rates any further."

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