Newspaper article The Evening Standard (London, England)

Hard Fight Ahead for Mortgage Warriors at Any Rate

Newspaper article The Evening Standard (London, England)

Hard Fight Ahead for Mortgage Warriors at Any Rate

Article excerpt


THE WAR between Halifax and Nationwide is real and it's ugly. The bank was clearly hoping to steal a march on all competitors with the announcement, alongside its annual results, that the core home-loan rate was being cut to 6.75%.

Chief executive James Crosby is determined, as he said, to win "the hearts and minds of customers" and a big reduction in the headline lending rate was presumably intended to play a key role in this process.

Sadly, Nationwide got there first. Perhaps it was coincidence, perhaps it got wind of Halifax's intentions, but one way or another the building society's decision to slash its standard rate to 6.49% was announced a full 24 hours before the bank's similar move.

The battle has continued all this week. Halifax has advertised the merits of its mortgage offer in the Press.

Nationwide has pointed out that the bank's existing borrowers will not automatically be transferred to the new rate: they will have to apply for it.

The point is a fair one. Halifax has been writing to those borrowers it perceives most likely to move to other, cheaper products, but the take-up to date has been less than substantial.

Some borrowers are locked in to fixed deals, some throw away the letter as junk mail and others just cannot be bothered.

Crosby believes the British banking customer is becoming more active and that the entire Halifax loan portfolio will be repriced within the next two to three years. In the meantime, the bank clearly benefits from those borrowers paying horribly expensive rates dating back to before the mortgage market became as competitive as it is now.

Halifax is not alone. Indeed it is in a better position than many rivals who are offering deep discount products, with initial terms 1% or 2% below the Bank of England's base rate. These lenders, including several small building societies, are obviously losing money on these offers as their savings rates are higher than their lending rates. …

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