Press Release 98 date: 20.2.01

Subject: The Mortgage war. Why Halifax plc shares are being marked down today.

SOBS are predicting that "Halifax will bank the good publicity from their mortgage rate cut and then quietly increase it in the near future. The cut is unsustainable because of the consequences to the bank through the loss of income & damage it will cause to its shareholders."

"Save Our Building Societies" campaign statement on Halifax bank, mutuals and the mortgage war. We welcome the mortgage war but remind customers of the tension that exists between mortgage interest rates and interest paid for savings. "You cannot rob Peter to pay Paul and get away with for very long when customers are more astute and informed than ever before." "Cut interest rates to savers to pay for cheaper mortgages and they will walk"

The Mutuality gap Lower mortgage rates mean cuts in interest paid on savings. Cut the savings rate too much and you cannot attract sufficient funds to meet the money needed for mortgages. There is what is known as the "mutuality gap" between banks and mutuals. This is the difference between interest charged on money lent and that for oney borrowed from savers. The difference or gap is lower for mutuals than for banks because the former do not have to make profits from shareholders therefore a slice of the costs is missing and does not have to be recovered from customers.

How it affects Halifax bank's share price If banks like Halifax cut the difference between the mortgage interest rates and savings rates the real loser will be their shareholder and their share value will go down. A bank would have real difficulties if it allowed its shares to slide for any significant period of time. At 10.20am Halifax shares were down nineteen and a half pence.

How Halifax are spinning the story today. On national radio today a charming and persuasive banking analyst spun it that Halifax are able to afford to cut the mortgage rate because it is using cheaper sources of money that their traditional saver. I strongly urge you to examine the facts behind this claim. Highly skilled PRs are one thing but it can sometimes be 'all delivery and no substance'. (Sorry I have to say this- its not personal!)

A "Closed question" for Halifax bank Please ask Halifax if they guarantee not to reverse this cut in their mortgage rate.

Bob Goodall co-ordinator
"Save Our Building Societies" campaign
"A thousand strong campaign fighting for mutuality"