Chancellor urging mortgage lenders to pass on interest rate cuts

Permalink: Chancellor urging mortgage lenders to pass on interest rate cuts
by Kay Murchie

Last week, The Bank of England’s Monetary Policy Committee (MPC) cut interest rates from 5.25% to 5%. This is the third time since December that interest rates have been cut in an effort to protect the economy from the global credit crunch.

However, many lenders are yet to pass on the recent interest rate cuts. Instead they are increasing rates, asking for larger deposits, tightening lending criteria and, in some instances, withdrawing deals from the market altogether.

Chancellor Alistair Darling is therefore urging mortgage lenders to pass on recent interest rate cuts on to homeowners and said it was time they did their bit after being helped by the Bank of England injecting £15 billion into the markets, amid the credit squeeze.

Prime minister Gordon Brown said he and the chancellor are to meet with lenders to discuss measures to ensure cuts are passed on to homeowners.

Over a dozen lenders including Cheltenham & Gloucester, first direct, Halifax, Nationwide and the Woolwich announced they would be cutting standard variable mortgage rates by the full 0.25%, in line with the base rate cut.

However, Abbey, Alliance & Leicester, HSBC and the Royal Bank of Scotland (which includes NatWest) said their rates are under review.

Mr Darling said if you can pass on those interest rate reductions, if you can help homeowners, help businesses, that will help all of us get through a very difficult time. The Government cannot force banks to pass on the cuts, but it can make clear its frustration.

However, Mr Darling does not believe that UK is heading for a 1990s-style housing crash. The key thing though is, unlike in the past, our interest rates are a lot lower. In the early 1990s you had three or four million people out of work, today unemployment is the lowest it’s been since the mid 1970s.