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Banks urged to pass on rate cut
05.12.08
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Prime Minister Gordon Brown said that he would be speaking to banks to press them to pass on the latest interest rate cut to borrowers.
He told GMTV: "I think banks should really pass on the interest rate cut. We are talking to the banks. Remember last time there was a cut, we had to speak to them before it was passed on and we will be speaking to them again."
Only a handful of lenders have said they will pass on Thursday's 1% reduction in full.
Mr Brown added that it was important to tackle the problem of the high Libor rate - the rate banks charge when borrowing from each other. He denied that savers were being left in the lurch by the drastic rate cut.
"What I would be worried about about most is if we had inflation going up and taking away the value of people's savings. The interest rate going down is necessary to get the economy moving again. If you are a saver the best protection you have is that inflation is kept low."
He said that the gloomy economic headlines would only improve, "when we have the level of international co-operation we need. "This is a global problem and we need action from other countries as well and I will be pressing for that from Monday."
But on Thursday night a Cabinet minister admitted the Government could not force banks to pass on the rate cut. Health Secretary Alan Johnson told BBC1's Question Time: "No, we can't force banks to pass it on. We do expect - and certainly that's the whole premise of the Bank of England's decision to bring interest rates down to 2% - that that will be passed on.
The dramatic percentage point cut left the cost of borrowing at 2% - a level not seen since 1951 and equal to the all-time record low in the UK. The European Central Bank also cut the eurozone rate from 3.25% to 2.5%.
HSBC, Lloyds TSB, Barclays' lending arm the Woolwich, and Bristol & West all said they would be reducing their standard variable rate (SVR) by at least the full 1%, while other lenders continued to keep their rates under review.
Nationwide followed the lead of its rival Halifax and said it would pass on the rate cut to its tracker customers in full.
Reader views (3)
My Mortgage is with kensington Mortgages,who i bleleive the FSA need to ensure the they pass the cuts their customers. Myself and coleague of mine from the office have been bombarding them with phonecalls as to why they are not passing on the interest rate cuts .Am on a varaible rate of 9.4% same as some of mu colleague. all they say is they borrow money from the bank at a different rate so they have nothing to do with the interest rate cut.I beleive there are other lenders like Kensington Mortgaes who are in the same situation, hence the banks have to reduce terms for these lenders before they can pass it on . if that is the case then i beleive the FSA have the taskto ensure this lenders are investigated and appriopriate action taken to ensure rates are passed down as millions of people are on rediculous variable rates and unless the FSA does something meaningful then rate cute won't be passed to them.
Please FsA get in tourch with kensington mortgaes and find out as we will be bombarding them with call but need your help....
- George,Milton Keynes, Milton keynes
Halifiax has only agreed to reduce it SVR by 0.25%, this is outrageous considering the tax payer has has to bail them out - such bank should have tax payers funds withrawn if they dont tow the line and pass on the full interest reduction.
- Raminder Bhalla, Northolt
I wont see the benefit of the last drop in October until January, so am not holding my breath as to seeing any benefit from this one for several months yet, if at all.
My mortgage is with Birmingham Midshires, which I believe falls under HSBOS, can't say here what I think of them ...
- Flo, London, UK
