Banks not passing on rate cuts
Updated on 07 February 2008
Banks and building societies are not passing on interest rate cuts to consumers, and in some cases have increased the cost of borrowing.
A report in the Daily Telegraph ahead of today's predicted interest rate cut compares the present situation, with the Bank of England base rate at 5.5 per cent, with May 2007 - the last time the base rate was at that level.
The report points out that the average mortgage rate last May was 5.66 per cent. By contrast, the average in December 2007, when interest rates returned to the level in May, was 5.93 per cent.
This disparity means an increase of £33.75 on a £150,000 interest-only mortgage.
Experts say the credit crunch and the higher inter-bank rate means lenders are having to raise more cash from customers in order to rebuild profit margins.
