THOUSANDS of borrowers with Intelligent Finance (IF), the offset arm of Halifax Bank of Scotland, are being urged to switch their mortgage after it refused to pass on December’s quarter-point fall in Bank rate.

The Bank of England kept rates on hold at 5.5% on Thursday, despite intense pressure for a cut, after reducing rates from 5.75% the previous month.

Most lenders have now cut their standard variable mortgage rates (SVRs) following last month’s move, though about 25% failed to pass on the full quarter-point reduction and a few have not cut rates at all.

IF, a favourite among wealthier borrowers who like to set their savings against borrowings to pay off their loan quicker, has kept its SVR at 7.25% even though its savings rates have been cut by a quarter point.

The decision does not affect borrowers on its tracker rates, which automatically follow Bank rate, or its fixed deals, but it will hit those who have moved on to the SVR at the end of their special fixed or tracker deal.

Brokers said IF was likely to have more borrowers on SVRs than lenders have on average because it is more difficult to switch to another bank when your savings, mortgage and current account are all in one place.

In its defence, the bank said that because of the benefits of offsetting, most of those on the SVR are in effect paying a significantly lower mortgage rate. Offsets work by setting your savings against your mortgage. Say you have a £150,000 home loan and £50,000 in savings, your monthly mortgage payments would be based on a debt of £150,000 but the interest would be calculated on just £100,000. This means you overpay and clear it more quickly.

Figures from IF show that someone paying its 7.25% SVR on a 25-year £150,000 repayment mortgage, with £50,000 in savings and £3,000 going into a current account each month, would cut 10 years off their term, save £132,000 in interest and have an effective rate of 3.5%.

However, mortgage analysts said this did not make IF’s decision to keep its SVR unchanged any fairer, especially as it raised it by more than Bank rate last year. In May, Bank rate rose by a quarter-point, yet IF increased its mortgage rate by 0.35 points.

David Hollingworth at L&C Mortgages said: “Even if you don’t want to leave IF because you think it’s too much hassle, there is no need to pay the SVR.”

The bank offers ‘retention’ products which you can switch to. Someone with a 25-year £150,000 repayment mortgage will have monthly payments of £1,084 and pay £46,650 over the term if they are paying the SVR of 7.25%. They could remortgage on to IF’s lifetime tracker at 6.49%, which would bring their monthly payments down to £1,011 and save them £3,208 in interest over the term.

If they remortgaged with Hinckley & Rugby’s lifetime offset tracker at 5.74%, monthly repayments would be £943 and they would pay £6,750 less than if they had stayed with IF.

SHE PLANS TO SWITCH

DEBBIE Pritchard Jones, 49, a civil servant from Risca in south Wales, has a mortgage with Intelligent Finance (IF). Her current deal, a two-year tracker, comes to an end in December Given IF’s poor record of passing on rate changes, she intends to switch before she is transferred to its standard variable rate at the end of her deal.

She said: “When you go for a variable-rate mortgage you accept your payments will rise if interest rates go up, but in return you expect to benefit from lower payments if rates are cut.

‘Luckily, because I’m on a tracker my repayments have gone down after last month’s rate cut, but if I was on IF’s variable rate I’d be annoyed.’