The decision not to impose the floor means that all Tracker mortgage customers will benefit from the full 1% fall in the Bank of England Base Rate and this is expected to be equivalent to £300 million of member benefit over the lifetime of the Tracker products.
In addition, following the decision by the Monetary Policy Committee (MPC) to cut the Base Rate, Nationwide Building Society today announces that it will decrease its Base Mortgage Rate (BMR) by 0.69% to 4.00% from 1 January 2009.
Nationwide's BMR is already the lowest amongst high street lenders and this move will maintain that position as well as reduce monthly payments for a borrower with a £100,000 repayment mortgage by almost £40 a month*. The standard variable rates of the Derbyshire and Cheshire building societies will also fall to 4.00% from 1 January 2009.
As Nationwide is holding its guarantee that BMR will never be more than 2% above the Bank of England Base Rate this means that if the base rate falls further, Nationwide will pass on further base rate reductions in full. Nationwide is the one of a few lenders to have this type of guarantee in place.
Graham Beale, Nationwide's chief executive, said: "This condition on our Tracker mortgages has been a feature of them for the past four years. It is clear, fair and reasonable that in the very challenging financial environment that many people are experiencing, waiving the floor in this way is the right and proper thing to do.
"As a mutual organisation, we are able to support our Tracker borrowers in times of difficulty. While we were completely confident that the Tracker floor was an enforceable condition, we have decided not to enforce it. Borrowers on our BMR are already benefiting from a rate which has been consistently lower than the average SVR on the market and, following the changes we've announced today, Nationwide's standard mortgage rate will continue to be the lowest amongst high street lenders.
"The decision taken today by Nationwide reflects how, as a building society, we can be fair and offer good value to our members."
