BRITAIN'S biggest banks are raking in £2m a day from hard-pressed homeowners by withholding last week's quarter-point cut in interest rates.
The Bank of England announced on Thursday that it would cut rates to 5.25% amid signs that Britain's economy is slowing.
The country's biggest lenders, including Halifax, Abbey, Nationwide and Woolwich, announced within minutes of the move that their variable mortgage rates would also fall by a quarter point.
However, while banks benefited immediately from the rate cut on their own borrowings, millions of homeowners with trackers or discounted mortgages will have to wait until March 1 for their repayments to fall. The delay of nearly three weeks will boost the banks' coffers by more than £50m, assuming about a quarter of Britain's mortgages, worth nearly £295 billion, are on tracker rates that do not move immediately.
First Direct, part of the HSBC group, is one of the few lenders that promised to pass on the reduction to all its variable-rate mortgage customers on the day of the announcement.
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It said: "Borrowers hear about the rate cut on the day; this way they can benefit from the rate cut on the day as well."
However, HSBC will not pass on the cut to borrowers on its standard variable rate until March 7. It will pass on the decrease to tracker customers from the March 1.
Some borrowers will have to wait as long as three months for repayments to fall. BM Solutions, part of Halifax, has told customers they may have to wait until May. They will end up more than £100 worse off than those whose lender passed on the rate cut immediately. Northern Rock customers have to wait until the second month after a change.
Ray Boulger of John Charcol, an adviser, said: "Most lenders have the facilities and flexibility to pass on rate cuts immediately, so I see no reason why they can't implement it.
"Borrowers would have to be content with the same treatment when rates rise. However, borrowers who take out a tracker mortgage do so because they believe rates will fall more often then they will rise."
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About 25% of borrowers take out trackers when rates are expected to fall, compared with only 10% when rates are rising, so banks clearly gain from delaying rate cuts.
Banks had also sneakily raised tracker rates for new borrowers ahead of last week's announcement, so the latest cuts will have no impact. Here, we outline more of their tricks.
Trackers raised ahead of a rate cut
Some lenders increased the rates on tracker mortgages by as much as 0.45 percentage points last month, obliterating the benefits of the two cuts to Bank rate since December.
Nationwide, for example, was quick off the mark to announce it was passing on the quarter-point cut to its variable-rate mortgage holders, but it had increased the cost of a tracker by up to 0.40 points since November.
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Then the building society was offering a tracker with a rate of 5.08%. Earlier this month, however, it hiked its rates so the best you could get was only 5.48%. That will now fall to 5.23% - but you are still worse off than you would have been with the November deal.
Richard Morea of broker L&C, said: "While the much expected cut in base rate is welcome news for many borrowers, those looking to take a new tracker mortgage now may not be as well off as they think."
Fixed deals are too high
Swap rates, which dictate the cost to lenders of fixed-rate deals, have fallen more than one percentage point since interest rates were last at 5.25% in April.
Yet instead of falling accordingly, fixed deals are more expensive. A year ago, a borrower could choose from many two-year fixes between 4.8% and 5.4%.
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Today, rates are typically 5.5% to 5.7%, with the exception of one or two lenders offering high-fee deals below 5% requiring a size-able deposit.
The return of extended penalties
Deals that tie you in long after a cheap fix or discount ends had disappeared for almost a decade, but they are back in earnest. Nor-wich & Peterborough building society's one-year fix at 4.99%, for example, has an extended tie-in period of two years at Bank rate plus 0.65 points, or 5.9% after the latest interest-rate cut.
Savers braced for a third round of cuts
Millions of savers could now suffer rate cuts for the third time since November, even though Bank rate has gone down only twice. Abbey, Barclays, Halifax and NatWest all slashed rates ahead of December's cut, and then again once it had happened.
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The big banks are unlikely to announce their new savings rates until the end of this month, though, taking effect from March 1.
Only government-backed National Savings & Investments has already moved among the big players. It cut its Direct Isa rate from 6.05% to 5.80% from Thursday.
Michelle Slade at data firm Moneyfacts said: "In December, as last week, the banks garnered positive publicity for passing on cuts to borrowers. But they recouped the cost from savers."