The majority of Nationwide Building Society's tracker mortgage customers will not feel the benefit of any further cuts in interest rates, following an announcement by the lender today.
In order to protect savers from future aggressive rate cuts, Nationwide said it will not reduce rates on the mortgages any further in a move likely to affect 250,000 customers.
Its announcement comes a week before the MPC meets to discuss interest rates, with many analysts predicting a further cut of 0.5% or even 0.75% from the current 2% rate.
Nationwide's decision will affect tracker customers with a 2.75% collar on their loan rate. It will not impact on people who have taken out a loan since November as they have a lower floor of 1%.
Some loans in the group's existing tracker book have rates of 0.76% below base rate, giving a current pay rate of just 1.24%.
The lender plans to invoke a clause in the affected deals enabling it to stop reducing the loans in line with cuts to the Bank of England base rate once official interest rates fall below 2%.
The collar on the majority of the group's mortgages was supposed to kick in when the base rate fell below 2.75%. However, Nationwide waived the clause last month and passing on December's 1% reduction in full.
A Nationwide spokeswoman says: "Savings rates are at an historic low and this move means we will not be forced into a position where we could have to cut savings rates more aggressively than we would otherwise like to."
Nationwide's decision not to pass on future rates will anger the Government as the Chancellor has repeatedly called on lenders to filter cuts through to customers.
However, the building society is not alone in making the decision to enforce a limit on rate cuts. A number of other lenders, including Skipton and Yorkshire Building Societies, also have collars that kicked in when the base rate fell below 3%.IFAonline
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