The Royal Bank of Scotland and NatWest has announced they will not be passing on the latest bank interest cuts their variable rate mortgage customers.

The bank, primarily taxpayer owned, admitted they had considered not passing the new 0.5% interest rate to their savings customers as well, saying its standard variable rate was already competitive, at 4%.

Other big UK mortgage lenders, including Nationwide and Lloyds TSB, have announced they will change their interest rates accordingly, some with more choice about it than others, and therefore, most of the 4 million people in the UK with tracker mortgages will reap the rewards of the cut.

What about Savers?

However, some banks are finding themselves obliged to cut their rates after promising their SVRs would only deviate a certain percentage from the Bank rate. For example, Abbey, refused to cut its rates last month, but has had to cut interest by 0.45% this time from April 1st.

Chief Executive of RBS retail banking, Paul Geddes 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.”

The bank has made clear that interest rates for its savings accounts will fall by less than 0.2% on average, and many would go unchanged.  On the other hand, those who want to be familiar with banking trends may refer to websites such as lovemoney.com to aid them in their financial decisions.

It’s decision comes after the RBS last week announced its huge losses for 2008, and that it would receive another taxpayer cash injection, on top of the scandal of former boss, Sir Fred Goodwin’s pension.

Average Current Interest Rate

This is now the sixth Bank rate cut, and the average SVR now stands at 4.77%. this is probably partly due to the fact that only 41% of mortgage lenders passed on last months rate cut to their borrowers.

The director general of the Council of Mortgage Lenders (CML) said: “the 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.

“Savings are the lifeblood of mortgage lending, and unless lenders can offer competitive rates to savers, their ability to offer new mortgages is restricted.”

A representative of mortgage brokers John Charcol, has predicted that many lenders that failed to pass on the February Bank cuts will have to do so this time. On the other hand, he suspects that many who did pass on the last rate cut will not change their rates this month.

What Do You Think?

Is RBS right to refuse to cut its rates this time? Should all banks be made to change their rates? Are interest rate cuts getting out of hand? Have your say here.