Lloyds TSB and HSBC said they would be passing on the one per cent interest rate cut to their variable rate customers in full.
HSBC announced its decision within minutes of the rate cut while Lloyds TSB, which also lends under the Cheltenham & Gloucester brand, had already said it would be passing on the reduction to its standard variable rate (SVR) customers.
But other lenders were slower to respond, with most of the major players saying their SVR was currently under review.
HSBC is reducing its SVR to 4.44 per cent while Lloyds TSB, which pledges that its SVR will never be more than two per cent above the base rate, will have a new rate of four per cent from January 1. The group is also relaunching its fixed-rate mortgages today, offering a two-year fixed rate deal of 3.89 per cent for people borrowing up to 75 per cent of their home’s value, who pay a 2.5 per cent arrangement fee.
It withdrew its tracker range yesterday for repricing and will be relaunching them early next week.
Despite the early cuts, the majority of lenders are not expected to pass on the base rate reduction in full to their SVR customers.
Three-quarters of groups with an SVR failed to cut their rates by the full 1.5 per cent following last month’s cut, with Barclays’ lending arm, the Woolwich, not reducing its SVR at all.
If lenders do pass on the one per cent cut in full it would save borrowers with a £150,000 mortgage about £85 a month, based on a new rate of four per cent.
People with a £250,000 mortgage will be about £142 a month better off, saving them more than £1,700 during the course of a year.
The UK’s 4.7million customers with discount and tracker mortgages, whose rates should automatically move up and down in line with the base rate, will also not all benefit from today’s cut.
It is thought about 600,000 people have trackers with lenders that impose a collar, meaning that when base rates fall below a certain level they no longer have to pass on the reduction.
Nationwide has a collar which kicks in at 2.75 per cent, meaning its tracker customers will benefit from only 0.25 per cent of the cut, while the Skipton and Yorkshire Building Societies have one of three per cent, meaning borrowers will not see any reduction.
Ray Boulger, senior technical manager at John Charcol, said: “While borrowers may have received the news of another significant rate cut with hope, I expect very few lenders to pass on the whole of this month’s cut, with most reducing their SVRs by between just 0.25 per cent and 0.5 per cent.
“Some who were coerced by the government into passing on all of last month’s 1.5 per cent cut against their better commercial judgment may choose to be parsimonious this time, unless there is further government browbeating.”
The Council of Mortgage Lenders welcomed the cut but warned that it may not be reflected “universally” in lower mortgage rates.
The group said: “Where lenders feel they can reduce mortgage rates, they will.
“But their own cost of funds varies.
“For the specialist non-deposit taker lenders, funding remains both expensive and scarce.”