RBS, public ownership and continued profiteering
Despite receiving a Government bailout, RBS/NatWest will not be passing on the latest cut in the Bank rate to its variable rate mortgage customers. The bank, which is majority owned by the taxpayer, said it had to consider savers too and its standard variable rate (SVR) was already competitive.
Some of the UK’s other big mortgage lenders have announced SVR cuts, although most were obliged to do so. Most of the four million tracker mortgage customers in the UK will automatically benefit from the cut.
Halifax, Nationwide, Lloyds TSB and Skipton have all cut their standard variable rate (SVR) by 0.5 percentage points in line with the Bank rate cut. Many of the lenders who are cutting rates are obliged to do so, having vowed that their SVR would only be a certain percentage above the Bank rate.
Abbey, which failed to reduce its SVR last month, has cut its rate this time by 0.45 of a percentage point. The changes only come into effect from 1 April. But RBS/NatWest said that it was going to keep its SVR at “its current competitive rate” of 4%.
In a statement RBS said, “The continued downward trend to Bank of England base rate has had a significant impact on customer savings rates. It is more important than ever to consider both our savings and mortgage customers when determining any rate changes.”
Roughly translated this means that money the grabbing behaviour has not changed along with the main ownership of the bank.
Unlike some lenders, RBS/NatWest does not have a collar on tracker deals, so customers with tracker mortgages will benefit from the Bank rate cut. Fixed-rate customers, by definition, will see no change.
The bank stressed that interest rates for savings accounts would fall, on average, by less than 0.2% and many would be unchanged.
As many of you will know, RBS last month announced the largest annual loss in UK corporate history and that it would receive a fresh injection of taxpayers’ money. It is also under fire over the pension of former boss Sir Fred Goodwin.
Following the previous five Bank rate cuts, the average SVR had settled at an average of about 4.77%, according to financial information service Moneyfacts.
Only 41% of lenders passed on any of the February Bank rate cut to their SVR borrowers.
The Council of Mortgage Lenders (CML) released a statement defending its members who have not passed on interest rate cuts. “This latest cut presents immense challenges for lenders whose margins are already squeezed as a result of previous reductions, leaving little scope to lower discretionary mortgage rates further.”
The general feeling on the market is that those who cut their SVR last time will keep it unchanged following the Bank of England’s latest decision. While Halifax will cut its rate again to 3.5%, Bank of Scotland mortgage customers face a SVR of 4.84% which is still under review, despite being part of the same banking group.
Underneath the discussion about publicly owned banks passing on rate cuts to consumers there is an inherent paradox. The banks want to continue pleasing their shareholders as they have always done, but now, through the government, taxpayers are the shareholders. This means that taxpaying customers are being ripped off so the bank can satisfy their taxpayer shareholders.
As this financial crisis continues, and the Government continues to grasp for a solution like a drowning man at a straw, strange circumstances such as this will become much more common and no one will be anymore better off.
