Tuesday, 21 January 2014

Lenders pledge to pass on full rate cut

Lenders pledge to pass on full rate cut

Views BlogsLiverpool BlogsCommentLettersSend a Story Video or PictureJohn McFall, chairman of the Treasury Select Committee, said banks needed to acknowledge their responsibility said: are being shortsighted. Given that they have had copious amounts of money from the taxpayer and are fully guaranteed, it must dawn on them that they have a social responsibility as well.

pressure on them will be maintained until they acknowledge that responsibility.

The Conservative Party added that other banks and building societies had a duty to drop rates.

But the decision by lenders to reduce rates owes as much to a fall in the key interbank lending rate threemonth Libor as it does to any political pressure.

Libor, upon which variable rate mortgages are based, fell by around 1% to just under 4.5%, to leave it standing 1.5% above the base rate.

Although still up on its longterm average, it appears the fall in Libor encouraged banks to pass on the reduction in base rates to both standard variable rate and new tracker customers.

Yesterday decision by the Bank of England to slash the base rate to 3% its lowest level for more than 50 years appeared to take the banking sector by surprise.

It resulted in a scramble by institutions to withdraw tracker products, which automatically track the base rate.

Some 33 lenders pulled their entire range of the deals for repricing.

Among the firms withdrawing tracker mortgages for new customers were major groups such as Halifax, Nationwide, Abbey, Barclays lending arm the Woolwich and Lloyds TSB.

A number of other lenders had previously hiked their tracker rates by up to 0.8% ahead of the Monetary Policy Committee interest rate announcement.

It is likely to be several days before the products are relaunched, and lenders are expected to take the opportunity to increase their margins, even if they pass on some of the reduction.

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