Bigger mortgage payers will not get full reduction: Vivien Goldsmith explains why the effect of cuts in home loan repayments will not be the same for all

MOST homebuyers will have to wait another five weeks, until 1 November, before their monthly mortgage payments fall following the cut in base rates.

And those with larger mortgages will be disappointed to discover that their repayments have not been cut by as much as the basic mortgage rate.

While most lenders have cut the standard mortgage - usually under pounds 60,000 - by 0.75 percentage points to 9.95, the discounted rates have had smaller cuts.

Nationwide, for instance has three bands - up to pounds 60,000, pounds 60,000 to pounds 120,000 and larger loans. The basic rate comes down by 0.75 percentage points to 9.95 per cent, the middle band drops by 0.6 to 9.7 per cent and the top band by 0.45 to 9.55 per cent.

John Hutchinson, corporate strategy director says: 'As rates go down the discount becomes a higher percentage of the rate, so you have to trim them back. The three-tier structure will be reviewed if we go down further.'

The Abbey has trimmed its differentials from 0.5 per cent for loans over pounds 60,000 and 0.71 per cent over pounds 100,000 to 0.26 and 0.5 percentage points.

John Berry, the Abbey's marketing director, says the average mortgage is well below pounds 60,000.

'It was important that the basic rate came down below 10 per cent,' he adds. 'I firmly believe that at rates below 10 per cent one starts to feel that this reduction is rather good.'

He says the first-time buyers' discount of 1.75 per cent for a year is still in place, so a first-time buyer with a loan over pounds 100,000 would be paying just 7.74 per cent initially - a 20-year low.

The largest lender, the Halifax, is not expected to announce its new rates until early next week. 'It is very important that we get the mix right between the interests of investors and borrowers,' says a spokesman.

So, while mortgage rates are likely to be in line with the general rates, there could be some innovations on the savings side.

There are some amazingly cheap deals on fixed-rate mortgages for those who would rather opt for security now rather than wait for further rate falls.

Cheltenham & Gloucester Building Society has a two-year fix at 8.25 per cent for loans up to 80 per cent of valuation. The mortgage can be repayment or endowment and there is no need to take any specific insurance policies. Borrowers who are intereviewed at a branch will get pounds 50 of their pounds 100 application fees refunded.

The society has not yet announced its variable rate and, unlike other societies that offer discounts for larger loans, has a 0.5 per cent permanent discount for loans of under 60 per cent of the valuation of the property.

The mortgage broker Chase de Vere has a fix at 7.99 per cent until January 1994 with a pounds 300 fee.

Portman Building Society has a good range of fixes - one year at 8.5 per cent, two years at 8.99 per cent, five at 9.5 and a 10-year fix at 9.99 per cent. The TSB has fixes at 8.99 per cent for three years and 9.3 per cent for five years for repayment and endowments.

----------------------------------------------------------------- REPAYMENT MORTGAGE - MONTHLY PAYMENTS ----------------------------------------------------------------- Loan Old rate New rate New payment Saving pounds % % pounds pounds 10,000 10.70 9.95 74.51 3.72 30,000 10.70 9.95 223.54 11.16 50,000 10.70 9.95 395.08 21.99 70,000 10.20 9.69 566.83 21.98 90,000 10.20 9.69 746.08 29.17 100,000 9.99 9.49 822.99 31.94 150,000 9.99 9.49 1,264.13 49.47 200,000 9.99 9.49 1,705.28 67.00 ----------------------------------------------------------------- Source: Abbey National -----------------------------------------------------------------

NEW BASIC MORTGAGE RATES

9.95%

Abbey National, Nationwide, Leeds Permanent, Midland Bank, First Direct

9.99 %

NatWest Bank, Alliance & Leicester, Northern Rock, National & Provincial, Newcastle, Lloyds Bank, Britannia, North of England

10%

Portman

10.25%

Skipton

(Photograph omitted)