Borrowers may start to see rate cut benefits
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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What about First Plus?????????????? They have failed to reduce rates and their customers are struggling, me being one. We are terrified that when rates start to go up they will increase rates inline with Bank of England rates, something they say they do not look at, funny every increase BOE have made has been applied but no reduction has been passed on. They are just ebng allowed to fleece the public and no-one is making them accountable. First plus customer are needing help.
the banks may look as though they are trying to be sensible but in reality they have forced so many people over the last few years to take out base rate swaps as part of any loan agreenment that they are coining the money in now and recouping thier loses through the back door, so many small and medium size businesses with low interest rate loans ie 1.5 – 1.75% are being blackmailed into having to re-adjust thier loan terms to suite the banks either in the lenght of time or it would seem more likely, as I am experiencing on the rate of interest that was my agreed base rate at 1.75 above base – the bank will not reduce my repayments to 2.25% on the premise that when the rate go up they believe I would have become used to the lower rate and wouldnt be able to afford the higher rates, but on the other hand they are deducting the interest of the base rate swap at the full ammount, if you know what this is all about please reply many thanks colin jones