Santander cuts A&L reversionary rate and update on LLoyds TSB SVR change

Posted on 28 May 2010 by Ray Boulger

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Santander has announced that following today's Court approval for the legal transfer of Alliance & Leicester plc to Santander UK plc all new A&L mortgages will now revert to Bank Rate + 3.74% (current pay rate 4.24%) instead of the current 4.99%.

Santander has said it will continue to set the “Alliance & Leicester standard variable rate” independently of Santander’s own standard variable rate and that accordingly the “Alliance & Leicester standard variable rate” may be different from the “Santander standard variable rate.”

However, by an amazing coincidence the new revert to tracker rate of 4.24% for A&L mortgages is the same rate as the Santander and Abbey SVRs! I wonder if this is an indication that when Bank Rate eventually increases Santander intends to increase its SVR fully in line with Bank Rate. If not, although the Group position appears to be to harmonise the reversionary rates for new Santander Group mortgages the rates will diverge at some point.

With existing Alliance & Leicester borrowers reverting to its SVR of 4.99% most will be able to remortgage on to a cheaper rate, although those with less than 15% equity in their property or some adverse credit will struggle to do so. Therefore existing A&L borrowers should vote with their feet.

Although this information about A&L’s new reversionary rate wasn't available yesterday, if the comparison table of the SVRs of other major lenders included in yesterday’s press release from Lloyds TSB's had been calculated on the basis of rates which will apply on 1 June, when the new Lloyds TSB/C&G SVR comes into force, and if the table used a combined rate of 4.24% for all Santander brands, in the same way as it used a combined rate of 4% for RBS/NatWest, the average rate of the major lenders would have come out at 3.85%, significantly below the 4.42% calculated by Lloyds TSB.

This is the comparison table that Lloyds TSB published yesterday:

Lender

Reversionary rate

HSBC

3.94%

Nationwide

3.99%

NatWest/RBS

4.00%

Abbey

4.24%

Northern Rock

4.79%

Alliance & Leicester

4.99%

Barclays

4.99%

Average rate

4.42%

Here is my amended comparison table, after correcting the Barclays/Woolwich rate from the 4.99% quoted to the correct reversionary rate of 2.49%, including Halifax and adjusting for today’s announcement from Santander:

Lender

Reversionary rate

Barclays/Woolwich

2.49%

Halifax

3.50%

HSBC

3.94%

Nationwide

3.99%

RBS/NatWest

4.00%

Santander

4.24%

Northern Rock

4.79%

Average rate

3.85%

Categories: Bank of England, Mortgages, Interest rates

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