According to recent reports many borrowers may start to benefit from the recent base interest rate cuts, as many lenders – under pressure from the Prime Minister, Gordon Brown – are now responding the recent rate cuts, and are cutting their own borrowing interest rates accordingly. In October of this year the Bank of England, along with other global central banks, applied a surprise base rate cut of 0.5% a day before the scheduled Monetary Policy Committee meeting, which is where interest rate movement is normally determined.

However, in November, just one month later, the central bank announced that it was slashing the base rate by a further 1.5%, taking it down to 3%. This was the most dramatic base rate cut since 1981, and the idea was that lenders would quickly cut their rates and borrowers would benefit from lower mortgage repayments, which would mean that they had more money to spend, which would ultimately boost the economy.

However, the problem emerged when it became clear that many lenders were not prepare to pass on the base rate cut, sparking fury amongst consumers and officials that they were simply out to profit from the base rate cut rather than pass the cut onto their borrowers and help to aid the ailing economy. This resulted in a number of stern comments from the Prime Minister and other officials, and it seems that in response to this an increased number of lenders have decided to cut their rates, thus resulting in more borrowers being able to benefit from the rate cuts.

From December a number of major lenders will be passing on the full rate cut to borrowers, and amongst these are thought to be HBOS, Nationwide, RBS, Northern Rock, Abbey, and Lloyds TSB.

A Nationwide official said that its customers would be significantly better off, stating: “This is the right and fair course of action for Nationwide to take for all our borrowers at what is a very challenging time for everyone in the UK.”

Gordon Brown was pleased with the decision of these lenders, and following the base rate cut he said: “Yesterday, we saw decisive action on interest rates from the Bank of England and the European Central Bank, and I welcome the fact that a number of British banks have now decided to pass on the interest rate cut to customers, to families and to businesses.”

However, the Council of Mortgage Lenders has said that each lender will have to make their own decision with regards to how much of the rate cut they would pass on, stating: “The problem banks have got is that they have limited funds and don’t have enough money to give to all the customers who may want them. I think over the next few days and weeks we will see that the banks and building societies will move by anywhere between 0.5% and 1.5% – the individual decisions will be on the basis of assessing what they want for their savers as much as what they want for their borrowers.”

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